Editor’s Note: Part of an ongoing Lane Report series on the ShapingOur Appalachian Region initiative to diversify Eastern Kentucky’s economy.
“It is important to talk about decreases in coal production, the job losses in the coal industry and the effect this has on the region,” said Kentucky Coal Association President Bill Bissett. But he has a further message he believes is equally important: Coal is still in business, significantly.
“We are still mining 70 million tons of coal each year in Kentucky, and Kentucky is still a major player,” Bissett said. “Most importantly, we are mining that coal in a responsible and legal way.”
Since 2009, Eastern Kentucky has lost 8,500 well-paying coal-mining jobs, more than half the region’s coal-mining employment, as production has plummeted due to increased federal regulations, rising operation costs and increased competition from natural gas. The latest estimates are that fewer than 6,000 mining jobs remain.
The trend motivated Gov. Steve Beshear and U.S. Rep. Harold Rogers in 2013 to launch the Shaping Our Appalachian Region initiative that aims to diversify a regional economy that has long risen and fallen with coal mining. (See articles in the July and August issues of The Lane Report)
Bissett said he is not a “Chicken Little” predicting that the sky is going to fall.
“Our grandchildren’s grandchildren are going to be using coal,” he said. “Coal is not going away, but the time has come that we can no longer take it for granted.”
Because the industry’s jobs pay much more than suggested replacements and miner family spending supports others’ paychecks, he said, coal should be a key element of SOAR strategy.
Coal traditionally is a cyclical industry, but there is a growing view that recovery prospects are much dimmer now that hydraulic fracturing of underground U.S. shale formations has pumped cheap and environmentally friendlier natural gas into the energy market. Within the past year the United States became the world’s largest producer of crude oil and natural gas, and this summer natural gas displaced coal as the top fuel for U.S. power generation.
Bissett, in his five and one-half years as KCA president, has been at the epicenter of the national debate about coal, particularly as it relates to Eastern Kentucky. In fact, he calls Eastern Kentucky “ground zero” in what has become an increasingly contentious battle of jobs and economic prosperity versus potential environmental impact.
EPA to Ky: Cut carbon emissions 30%
An announcement last month from the Obama administration is a good example.
In early August, the Environmental Protection Agency released much-anticipated proposed final regulations concerning greenhouse gases (GHG) that, if implemented, will have a significant impact on Eastern Kentucky and consequently all of Kentucky, according to Bissett.
The EPA wants the commonwealth to reduce its annual carbon emissions to 63 million tons by 2030, a 30 percent decrease from baseline 2012 levels. Preliminary EPA regs had called for Kentucky to cut those emissions by 15 percent to 77 million tons, a target that already meant moving away from coal-fired electricity generation.
The Obama administration’s Clean Power Plan, the central piece in U.S. efforts to address climate change, aims by 2030 to reduce all power plant carbon dioxide releases by 32 percent below the levels of 2005.
“With 535 days left in office, President Obama and the United States Environmental Protection Agency have announced a final rule regarding the regulation of greenhouse gases (GHG) that will raise electricity rates and damage the reliability of electricity in the United States, while doing little to address the issue they seek to address of climate change,” Bissett said.
“While we are confident that this rule will not survive legal scrutiny in the courts, electric utilities are already moving away from coal to comply with the possible threat of this new regulation. While our nation’s economy will be harmed and electricity rates will ‘necessarily skyrocket,’ as President Obama announced on the campaign trail in 2008, this new regulation would be especially damaging to the economies of coal mining and coal-using states like Kentucky and West Virginia.”
Lower than average electric power rates in Kentucky have been a powerful draw for business attraction and growth, especially for power users such as manufacturing and metal production. Aluminum smelters and users have a big presence, and the state is home to the largest stainless steel producer in North America.
“This unilateral mistake by the Obama administration will be observed by other countries, such as India, China, Spain, Germany and many other existing and developing countries – but only observed,” Bissett said. “These countries are either moving back to coal after creating ‘energy poverty’ through more expensive forms of electricity production or developing coal-fired electricity sources like we did in the United States to build their economies.
“Although we have faced many new regulations regarding coal production and use from the Obama administration, it is clear that these GHG regulations are, by far, the most damaging and economically harmful when compared to any of the Obama administration’s previous actions,” he said.
“Simply put, there is no greater threat than these final GHG regulations to coal-powered economies like Kentucky’s economy, and we must do everything possible to stop this final rule and show the growing numbers of people and organizations against this wrongheaded and ineffective regulation.”
Underground mining down another 10%
The EPA’s proposed regulations came as second-quarter 2015 numbers on coal production and coal jobs were announced. According to energy.ky.com, Eastern Kentucky coal production decreased 5.4 percent during the second quarter.
Surface mines increased production by a marginal 0.5 percent. Underground mining operations decreased 10.3 percent but remain the leading coal extraction method in Eastern Kentucky. Below-surface mining accounted for 52 percent of regional production.
During the second quarter of 2015, the state reported, there were 5,889 persons employed at Eastern Kentucky coal mines, a decrease of 10.6 percent from the first quarter of 2015. Coal mines in Western Kentucky decreased total employment by 110 jobs or 2.9 percent.
Bissett is familiar with the numbers, but said there is more to the story:
“These (coal jobs) are jobs that start at $65,000-$70,000 a year, and many provide more than a six-figure income with overtime. In addition, for every coal job there are three more indirect jobs (i.e., heavy equipment operators) as well as induced jobs – those at gas stations, restaurants, etc.”
Bissett said the coal industry supports the efforts being undertaken via the SOAR initiative, but he is not enthused about efforts to create jobs in Eastern Kentucky through sectors such as tourism.
“These are jobs that start at $15,000 to $30,000,” he said. “Tourism is also a competitive field. Eastern Kentucky will be up against areas such as Gatlinburg that are already established. People also want easy access. The transportation infrastructure in Eastern Kentucky is still a challenge.”
Coal wants and needs to be at the table as plans are made to enhance the region, Bissett said.
“SOAR is doing its best to find the bright spots in Eastern Kentucky,” he said. “These are tough conversations to have, but we must have them and SOAR is making this happen.”
There are more tough times and tough conversations ahead for coal and Eastern Kentucky, Bissett predicts.
“We need to maintain what we have,” he said, “and this won’t be easy, particularly in light of Obama’s proposed regulations.”
The state and the industry, Bissett said, must also continue to maintain a market for coal.
“This is significant,” he said. “The market is going to change. Coal usage is going to fall off in certain states. The market may now be overseas. So many countries are now moving to coal for electrical production. The rest of the world is going a different way on coal usage. Overseas may now be the end user. The domestic market is now tenuous.”
The change will show up in our electric bills as well.
“Electricity rates are going to go up, particularly in Kentucky; the reliability of electricity is going to decrease,” Bissett said. “It will be interesting to see what happens if people are without electricity for a while.
For Eastern Kentucky, uncertainty will reign, especially when it comes to the region’s reliance on coal.
“Energy issues are constantly changing,” he noted. “Twelve years ago we were importing natural gas to meet demand; now we have an abundant supply. After the (2011 Tohuku) tsunami, Japan is now moving (back) toward nuclear power.”