FRANKFORT — Coal production accounts for around $10 billion in Kentucky’s economy, producing 42,078 jobs (directly and indirectly combined) and nearly $470 million in state tax revenue, according to a study by the staff of the Legislative Research Commission.
But it’s not going to last if something doesn’t change and, needless to say, Kentucky lawmakers and coal interests aren’t happy.
Jonathan Roenker and Jean Ann Myatt of the LRC reviewed their study for the Program Review and Investigations Committee on Tuesday. They were followed by Energy and Environment Cabinet Secretary Len Peters and representatives of the industry, all of whom decried the assault they see on coal from market forces and especially from federal regulators at the Environmental Protection Agency.
The last is the primary villain in the eyes of some lawmakers, especially those from eastern Kentucky, but industry analysts have blamed much of the downturn in the coal industry on market forces, though they cite stricter environmental enforcement as a factor as well.
Even Bill Bissett, president of the Kentucky Coal Association, listed regulators as only the fourth-most important factor in the uncertainty facing the coal industry. Bissett said the competition from natural gas, which currently is cheaper and cleaner for electrical generating utilities than coal, the warm winter and eastern Kentucky’s low sulfur coal as contributors to the downturn in the market.
Then comes “the anti-coal administration in Washington, D.C.” followed by the general economic downturn, Bissett told the committee.
But that doesn’t mean lawmakers like committee co-chair Rep. Fitz Steele, D-Hazard, aren’t angry at the administration.
“I’m pretty level-headed and calm about a whole lot of things, but the current administration in Washington has targeted my people and my industry in eastern Kentucky, and that (angers) me,” Steele said.
But while the administration of President Barack Obama may not have been kind to the coal industry, Bissett said, the Kentucky General Assembly has had a sympathetic ear.
“We’ve been able to count on you,” Bissett said to the committee while thanking them for their support of the industry. Peters also commended the General Assembly for its support for research and the coal industry.
Whatever the future of coal, no one denies there are fewer mining jobs in Kentucky which has impacted eastern and western Kentucky coal fields and economies. The LRC report said in 2010 there were more than 19,000 people employed in coal mining in Kentucky — down from 50,000 in 1979. Lawmakers from coal regions on the committee, Bissett and Peters all said there are at least 2,000 fewer mining jobs now than in 2010 — and the losses are probably greater than that.
Still, in all mining jobs account for only 1 percent of non-farm employment in the state, Roenker told the committee. The report lists Kentucky as the third-highest coal producing state in the country, behind Wyoming and West Virginia, and Kentucky coal accounts for 10 percent of U.S. coal production.
Coal generates 90 percent of electricity in Kentucky, but the percentage nationally has fallen from around 50 percent to under 40 percent. Part of the reason is that utilities are moving away from coal.
Peters said new coal-fired plants cannot meet proposed emission standards using current technology and many utilities are either constructing natural gas plants or considering them. The proposed regulations exempt existing plants, but Kim Nelson of the Western Kentucky Coal Association said many of the existing plants in Kentucky are 50 and 60 years old and will have to be replaced or retro-fitted before long.
Nelson, like Bissett and Peters, said the uncertainty of the future is hampering the coal industry. Peters said it is “one of the most difficult times for us to make these projections” of future coal markets and the role of natural gas in generating electricity.
Peters and Nelson warned that increasing demand for natural gas will inevitably drive up its costs and if it doubles in price, it will then become more expensive to fuel generating plants with gas than it would with coal.
Along with committee members Sen. Tom Buford, R-Nicholasville, Sen. Dan Seum, R-Louisville, and Rep. Leslie Combs, D-Pikeville, Peters and Nelson predicted Kentucky will see higher electrical rates in the future. Peters said Kentucky currently has the fourth-lowest electrical rates in the nation and that, in turn, attracts manufacturing industries like the aluminum smelters in western Kentucky.
All of that adds up to declining fortunes for the coal industry, at least in the short term, according to Roenker of the LRC.
The study does not account for any costs to the state or the economy from coal, costs of regulating and permitting the industry or cleaning up the environment, Roenker said.
Nor did the committee hear from anyone critical of the coal industry or its impact on the environment. But Rick Clewett with the Sierra Club was at the meeting and while he said the report should have calculated some of the indirect costs of coal “which in effect is subsidization of the industry,” he otherwise thought the report “fairly straight forward.”
He acknowledged the “sobering times” facing coal producing regions and their residents who depend on the industry for a living.
“We really do feel the pain of miners and we feel the pain of the various Kentucky lawmakers from coal regions,” Clewett said after the meeting.
But Clewett believes electrical rates will rise regardless of the fate of the coal industry and lawmakers are mistaken when they blame the Obama administration as solely to blame for the industry’s problems.
“The thing is there’s not enough willingness to look forward and away from the status quo,” Clewett said.
RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at email@example.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.