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West Virginia Unprepared for Future Without Coal

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The economy in coal country is being left behind the rest of America.

Coal communities have long suffered from higher rates of poverty than many other parts of the country, but they now face an extended period of decline. In regions where coal mining makes up a disproportionate share of the economy, this portends economic pain for years to come.

The Washington Post has published several articles on the economic hardship people in coal-dependent communities experience, with a focus on West Virginia. One article asked whether local and regional economies put themselves at a disadvantage by becoming overly dependent on extractive industries as an engine for growth.

In other words, was relying on coal a recipe for a stagnant economy from the start?

There is evidence that a "resource curse" can set in, in which an economy that is too dependent on natural resources suffers from corruption and poverty and retards growth in other industries.

West Virginia has one of the poorest-performing economies in the country, and counties where coal mining is concentrated are the state's poorest and least economically diversified.

They suffer from repeated booms and busts, which are tied to coal prices and the level of production. Personal income, as a consequence, is highly volatile. And with several generations of families opting to work in the mines instead of pursuing higher education, these counties have a lower-educated populace and the economy remains reliant on the coal industry.

The newspaper followed one family as it struggled with the painful decision of whether or not to abandon their hometown because jobs in the mines have dried up.

Busts have occurred in the past, and people weather the hard times, waiting for sunnier days at some point in the future.

The difference is this time the bust is not cyclical. It is structural.

Coal is becoming increasingly uncompetitive in U.S. electricity markets. That is due to several well-documented trends, including cheap natural gas and tightening environmental regulations.

Coal industry officials and West Virginian politicians have avoided addressing the serious cracks in its foundation, instead assuring the public that all will be well once natural gas prices rise and the Obama administration ends its "war on coal."

But there are deeper problems facing the coal industry, as Taylor KuyKendall from SNL Financial points out in an excellent article about the coal industry's problems.

First, there is a possibility that natural gas prices will remain relatively cheap for years to come. Coal industry executives pointed to the cold winter of 2014 as evidence that coal was set for resurgence. But a cold winter will not be enough to make coal more attractive than natural gas for utilities planning billion dollar capital investments in power plants that will operate for decades. Jeffries LLC, a global investment bank, wrote in a note to investors that the cold winter won't save big coal. "Our concern was that a weather-driven rebound in gas prices above $4 led some to believe everything was OK for coal," the bank wrote. "Everything is not OK."

Second, whether or not the industry thinks environmental regulations are justified, it is highly likely that the regulatory environment for coal, which is one of the most polluting forms of energy, will only get tougher. That means that projections about the health of the coal industry could be way too optimistic. Not only will it be nearly impossible to build new coal plants, but old ones might shut down at a quicker pace than anticipated.

"As we noted in response to the Obama administration's proposed CO2 regulations, given the likelihood of decades of cheap gas, it is hard for us to see power generators opting to invest billions of dollars in environmental upgrades for older coal power plants," the Jeffries LLC report states. "Long term, we believe that the risk to further coal power plant shutdowns is to the upside."

Finally, West Virginia's coalfields are old and depleted, with the best seams mined out. That means that even if coal does survive, West Virginia's coal industry will continue to lose market share to coal from other places.

The decline of Appalachian coal is real and could happen faster than many people expect. This is something that West Virginia's politicians refuse to grapple with. Instead of pushing an agenda that would diversify West Virginia's economy, and plan for a future without coal, they have been "painting a picture of the rosy future that could await the coal industry, were it not for the Obama administration," as Ken Ward, Jr. wrote in The West Virginia Gazette.

And as the people profiled in the Washington Post already know, that's going to have serious human consequences.  

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Read/Post Comments (11) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 01, 2014, at 10:56 AM, cjkmf1 wrote:

    Forced change means venturing into the unknown but it don't always have to be bad. If WV plays its cards right it's children could benefit big time in two ways. One, knowing dinosaur industry jobs are gone and two, attending a revamped K12 ed that preps them for 21st century employment instead of being held back by the old school.

  • Report this Comment On September 01, 2014, at 11:21 AM, comosichiam wrote:

    This is the result of the eviro kooks who look at the country with rose colored glasses not seeing the harm they cause the citizens financially and healthfully with their kook environmental policies that would not change a thing but earlier I said rose colored glasses they are incapable of rational thought so there is only one answer absolute rejection of all liberal and progressives no matter what office they are running for be they Democrat or Republican.

  • Report this Comment On September 01, 2014, at 12:45 PM, watchit wrote:

    Your article comes off as one from an environmental nut. The title should say the entire U.S. is unprepared for a future without coal. We're shutting down so much power from coal plants in our country and not replacing it with other sources. Now coal is declining that's true, but it's not doomed quite yet like you think it is. It still has several years (decades) to go. You mentioned the past winter in your article, coal did help keep the lights on. What you failed to mention was that natural gas resources were down to seriously low levels because everyone was using it to heat their homes. Natural gas alone would not have gotten us through that winter. Basically for the time being there isn't enough natural gas plants and infrastructure to meet our country's energy needs. Now you made WV sound like some backwoods uneducated state that only wants their kids to work with coal. That is a false presumption. Many people choose to work with coal because the jobs are high paying, if the govt. wasn't trying to shut it down it would still be doing fairly well. Coal is a big industry in WV, but it is not the only industry. You may be surprised to know that a lot of people in WV do graduate and go on to college.

  • Report this Comment On September 01, 2014, at 10:02 PM, 1DumbPres wrote:

    It is something how these ignorant little city boys and girls want to trash the people of west Virginia and it's high paying coal mining jobs,,actually it's quite silly how they want to get rid of such a robust economy that has carried this country and made thousands and thousands of very good paying jobs. So now the super duper ignorant one's that think they know a better way is going to change it all bahahahahaha All I can say people is ya better hang on because there way is gonna be total bust!!!! Sad they are to stupid to see it but of coarse there prob the same people that signed the free trade agreement that sent this country into a downward spiral on jobs,because they have all went to these other country's that pay ..............50 cents an hr. So now all the businesses get to shut down again like they did in the 1980S and everybody leaves the state to find employment and family's are destroyed because of such ignorance.

  • Report this Comment On September 01, 2014, at 10:51 PM, coalminer wrote:

    Written by A true Obama supporter, that is A liberal that thinks liberal Democrats should be able to say how the whole world will live and work. Obamas liberal propaganda machine at work, the people of West Virginia will get to vote in Nov. If the good people of West Virginia vote for A Democrat they can expect to see our good coal jobs go down the drain, Obama has already made that clear. And as for all you yanks giving advice, we don't need it, we need jobs.

  • Report this Comment On September 02, 2014, at 3:53 AM, Charleysdad wrote:

    From the comments above you see why the state is in the shape its in and why many of us are forced to leave.Coal has been declining for 50 years,starting with western low sulphur coal replacing high sulphur, higher polluting coal when I was a kid, in the 70ies.Now natural gas is going to finish the job.As usual, anyone with any sense of fact and history is labeled a nut and {the horror} a democrat or liberal.I guess what hasnt happened in the last 40 years probably wont happen in the next 10-15 either.Folks like Coalminer and 1dumbpres think the rest of the world should forego cleaner and eventually safer and cheaper energy, just so they can keep THEIR sad for them...and how very sad for the home state I love.

  • Report this Comment On September 02, 2014, at 7:33 AM, Jay1124 wrote:

    But Obama!

    It figures that the delusional coal supporters blame Obama for thier problems.

    Whether you think coal still is a viable energy resource or not the fact remains that natural gas is the better option in terms of cost and availability long term. If WV wants to wait until the inevitable end of the coal industry to change their ways then so be it. They will have nobody but themselves to blame.

  • Report this Comment On September 02, 2014, at 9:23 AM, bddd123 wrote:

    im just a dumb coal miner from wv, but wait about two or three years when natural gas reserves are getting low and every one electric bill triples , in the mean time fracking is polluting our water ... the gov. wants us to go green. right? why did obama put a 33 percent tarriff on solar panels.. make solar panels cheap and put them on every roof in the us.... oooo then big business wont make the money.. why are the elec. co. making RECORD profits, yet our elec. bills keep going up.

  • Report this Comment On September 02, 2014, at 11:33 AM, watchit wrote:

    @Jay1124 you are the delusional one, Obama has been quoted in saying that he would bankrupt any new coal plants. He was also quoted in saying through his plans of shutting down coal, electric rates would necessarily skyrocket. Other sources are starting to compete with coal, that's true, but that alone isn't hurting the coal industry. The obama administration's unrealistic regulations are what is causing great harm. But WV won't be doomed when and if they totally kill coal, because gasp! WV is also abundant in natural gas, it's actually one of the fastest growing industries in WV. (Why didn't the article mention that)

  • Report this Comment On September 02, 2014, at 1:56 PM, conmaggot wrote:

    Coal usage dropped 21% between 2005 and 2012.

    Europe, with a few exceptions, has moved away from new coal plants.

    China has gotten serious about the environmental impacts of coal usage and is investing in alternatives.

    But this is President Obama's war on coal?

    Whether President Obama is in the White House or not, coal's future is not likely as bright as its past.

  • Report this Comment On September 02, 2014, at 2:28 PM, Mathman6577 wrote:

    Once the current administration is gone coal will be back and all left-wing elitists will have to find some something else to bash.

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