MAC-D's Report on Coal in Appalachia Overlooks Much

MACED, short for Mountain Assocation for Community Economic Development, has released a report asserting that coal costs the state more than it receives in tax revenue and that coal is an overall drag on KY's economy. The coal industry mines almost $4.5 Billion worth of coal each year in Appalachia, directly employs more than 18,000 workers in Eastern KY alone, and we haven’t even begun to calculate the indirect employment provided by coal in areas such as financial services, retail, services, equipment sales, road maintenance, and mechanical work.

MACED arrived at their conclusion by calculating the amount of money KY coal generates to the Commonwealth in the form of tax revenues ($527 million) versus the amount of money the Commonwealth spends out of their general fund on coal ($642 million) and arrives at a $115 million shortfall that the coal industry, presumably, should make up in the form of more taxes.

In addition to the facts, once again, that coal is a $4.5 Billion industry employing 18,000 workers in Eastern KY alone, many of them at wages in excess of $50K, there are several logical problems with MACED’s analysis.

First, MACED asserts that state expenditures include subsidies for “the regulatory agencies that deal with [coal’s] impact.” Many of these so-called impacts are impacts on the commons and even private property. They’re regulated through environmental compliance. Others include safety regulations enacted for the greater public good and the care of the worker. Assumedly MACED is in favor of many of these burdens that the state imposes on the industry. For them to turn around and use these expenditures to criticize the industry is a bit odd.

Second, I’m unsure where MACED’s arriving at their employment figures when they cite just under 18,000 workers in coal statewide. According to the latest Census data below are the employment figures for mining in Eastern Kentucky:

4,444 Pike
1,586 Perry
1,218 Leslie
1,122 Bell
345 Boyd
709 Breathitt
855 Clay
169 Elliot
2,285 Floyd
2,714 Harlan
1,045 Knott
568 Knox
164 McCreary
428 Magoffin
148 Lee
578 Whitley
86 Rockcastle
7 Lincoln
99 Jackson
74 Wolfe
44 Owsley
25 Wayne
14 Cumberland
65 Clinton
7 Bath

By my calculations this means there are more than 18,000 workers in mining in Appalachian KY alone.

Third, MACED also uses $239 million in highway maintenance to arrive at the total amount of money spent by the Commonwealth “subsidizing” the coal industry. This overlooks the fact that many of these roads were built by Kentucky coal severance taxes. It’s also unclear as to how MACED arrived at their numbers. How, for example, do they break damage to highways caused by coal out of overall wear and tear on roads?

Fourth, MACED recites the old Appalachian poverty canard: “For all the wealth that coal produced over the last century, Eastern Kentucky's coal counties remain among the nation's poorest.” It’s true, Appalachia’s counties remain among the poorest in the nation, comparable with regions such as the Mississippi River Delta region, inner city communities, and Indian reservations. But a quick look at the poverty stats and mining employment stats reveal a complex picture. For example, Pike County, the largest coal producing county in KY, is also the county with the least poverty in far Eastern Kentucky. Wayne and McCreary County, meanwhile, two counties that employ roughly 225 coal miners but have no mining operations, are among the most impoverished counties in KY. Boyd and Pulaski, both counties with some small amount of mining, are among the most affluent in Appalachia. Poverty is entrenched in Appalachia, but to blame it on mining rather than other factors- cultural ones foremost among them- is a bit specious.

Fifth, MACED picked up on the new “tourism will solve our problems if we would only stop mining” canard. Let’s get this straight: a $4.5 Billion annual industry is going to be replaced by tourism? In Alaska, a state far better positioned to capture natural tourism than KY, tourism generated roughly $1.6 Billion in 2003. By my calculations that’s still $3 Billion shy. Forgive me, but who’s suggesting “that a new golden age is about to begin”??

Finally, MACED suggests that coal is interfering with our true economic priorities: alternative energy and (again) tourism. I believe Appalachian KY can walk and chew gum at the same time. We can work on growing our tourism industry (here, MACED can help by continuing their wise focus on entrepreneurship) and we can work to find new ways to take advantage of modern business practices and technology to create new energy systems. The goals of mining our vast coal resources and creating new industries are not mutually incompatible. In fact, I know from first hand experience working with new energy entrepreneurs, that some of their biggest allies- in fact some of the very entrepreneurs themselves- have strong coal ties.

MACED claims its report wasn’t an attack on coal. But it’s hard to see that from here. They could have simply made an argument that coal needed to pay more taxes without diverging into anti-coal arguments like “coal begets poverty” or “we can’t do both.” It also seems that MACED’s report fits into a carefully orchestrated campaign by liberals like the Lexington Herald Leader, Ron Eller, and the Kentuckians for the Commonwealth, an organization with whom MACED has increasingly strong ties. It’s this economic developer’s belief that the organization is increasingly forgetting that the “E” in their name stands for “economic [development]”. Reports like these make it appear that the group has an ideological agenda, rather than a development agenda. That’s unfortunate.

A footnote: I'm responding to the John Cheves/Lexington Herald Leader/MACED article in the 6/25 paper in this post.