Finance

In Life After Coal, Appalachia Attempts to Reinvent Itself

The decline of the mining industry started long before the Obama administration and will likely continue even with Trump in the White House. That's why local leaders are starting to diversify their economies and prepare their people for an uncertain future.
by | December 2016
(AP/David Goldman)

Dan Mosley’s father was a coal miner in Harlan County, in the hills of Eastern Kentucky. So were his grandfathers, his uncles -- all his people. Mosley went a different route, though. He became a successful banker, with a comfortable life. But he wasn’t blind to the fact that most of his family and friends who had once worked in the mines were now unemployed. Given the decline in coal production, there are thousands of former miners in his part of the state.

Mosley decided he had to try to do something about that. Last year, he ran successfully for the job of county judge-executive. “The downturn of the coal industry has had an absolutely devastating impact on this economy,” he says. “We weren’t going to have anything left for my kids and maybe my grandkids if we didn’t get to work having a diversified economic development effort.”

The job has ended up being tougher than he expected. Mosley knew that coal’s decline meant less revenue was coming into the county treasury, even as the demand for services was increasing. The drop has been faster than anticipated. In 2012, Harlan County collected $5.3 million in severance taxes from the coal industry. This year, it expected to receive $1.7 million, but actual collections have come in $1 million lower -- a sizable chunk of money in a county that’s down to fewer than 30,000 residents. The severance funds aren’t even enough to service the $14 million in debt that Mosley inherited, let alone do anything to boost the economy.

Mosley is just one among many political leaders in his part of the state facing the same predicament. When Bill Clinton left the White House in 2001, there were 30,000 coal mining jobs in Eastern Kentucky. By the time George W. Bush left office eight years later, that number had been cut in half. Now, as President Obama’s tenure reaches its end, the number of people still working in coal in the region is below 4,000.

All of coal country is shedding jobs. Consumption of coal to produce electricity is down nationwide by nearly a third since 2008. Production has fallen even more and continues to slide. Earlier this year, it reached a 35-year low. Among major coal companies, bankruptcy has become the default position. And, since the coal industry has a heavy supply chain, the multiplier effect for each mining job lost is substantial, from machinists and truck drivers to security guards and even restaurants seeing fewer customers walk in the door. “We have put all our eggs in one basket for decades in this region,” Mosley says, “and that basket has spilled.”

Coal country’s troubles reflect the type of economic pain that can hit an area that’s relied too long on any one sector or employer, whether it’s the local plant closing or timber or textiles falling prey to global competition. “Some of these places that are rural, that are isolated, that for a long time have relied on a single industry have seen forces beyond their control create major job losses,” says Kathy Nothstine, who until recently was the program director on economic development for the National Association of Counties.

Areas such as Eastern Kentucky had high rates of poverty even in the days when coal was king. Now, thousands of additional workers who were once accustomed to pulling in $80,000 or $90,000 a year are either unemployed or lucky to be making $12 an hour in retail. That’s why Mosley and local officials in coal-production regions from Alabama on up to Pennsylvania keep repeating one word as a kind of mantra: diversification. Places that have maintained an economic monoculture based on coal are trying to think of ways to broaden their employment base, while modernizing the skills of their residents. It’s easier said than done. Everyone understands that dozens of new employers won’t pop up overnight. And, with so many areas pursuing similar strategies -- promoting tourism, chasing manufacturing, looking to expand the health-care business -- competition is intense.

“There’s never going to be anything that’s going to come in, in my part of the world, employing 1,000 or 1,500 people,” says Michael Miller, who directs the Kentucky River Area Development District. “In saying that, every so often we make a little headway. Five people go to work here and 10 over there and 50 over here. We got to take our little successes and celebrate them for 15 to 20 minutes and then go back to work and try to have another little success somewhere down the road a ways.”

Health problems and societal ills go hand in hand with the disappearance of jobs. Appalachia suffers from high rates of obesity, smoking, diabetes, heart disease and prescription drug abuse. Harlan County itself ranks 3,139th out of the nation’s 3,143 counties in life expectancy for both men and women. For all these reasons, demands on government in coal country -- for health programs, job assistance, public safety and education -- are growing just at the moment the tax base is shrinking.

This isn’t just a problem for Appalachia. Wyoming, which is now far and away the nation’s leading coal producer, will start the year facing a shortfall of $157 million, or more than 5 percent of its budget, due in large part to an unprecedented drop in coal production. There, too, the declining market for coal has brought added burdens on government.

But production isn’t falling quite as rapidly out West as it is in the central Appalachian region. That’s mainly because underground mining in Kentucky or West Virginia can cost four times as much per ton as surface mining in Montana or Wyoming. “Even if natural gas prices go up, it’s not going to be Eastern Kentucky coal that’s going to bounce back -- it’s going to be Wyoming,” says Jason Bailey, executive director of the Kentucky Center for Economic Policy, a nonpartisan research group. “There’s not a future for Eastern Kentucky coal.”

Bailey’s blunt talk is unusual. Politicians and industry spokesmen in Appalachia continually decry the “war on coal,” blaming the Obama administration and federal regulations for strangling the sector. There’s little doubt that environmentalists would like to shut the coal industry down entirely, in hopes of improving air quality and curbing greenhouse gas emissions. Former New York City Mayor Michael Bloomberg alone has donated $80 million to the Sierra Club’s “Beyond Coal” campaign, which seeks to eliminate coal-fired power plants altogether. Just in the past two years, 135 coal-fired plants have shut down nationwide.

But environmentalists aren’t coal’s biggest enemy. Natural gas is. Coal production’s decline started well before Obama released his Clean Power Plan, designed to cut down on greenhouse gas emissions. Environmental Protection Agency regulations curbing mercury and other toxic emissions didn’t kick in until this past June. It was under the old rules that coal hit the skids. According to a recent study from Case Western Reserve University, as coal use plummeted between 2008 and 2015, shale gas production increased by a factor of more than 10, while its price dropped in half. The drop in demand for coal, from overseas customers as well as domestic ones, was devastating. And the price and technological advantages enjoyed by natural gas are only accelerating. “If you’re a power plant operator and you see gas supply is continuing to increase and natural gas can do the job cheaper -- by a lot -- the decision to switch from coal is pretty easy,” says Walter Culver, who co-authored the study. “As we look toward the future, we see no natural mechanisms that will permit coal to recover.”

Depending on how deep and lasting local levels of decline have been, coal communities are at different stages of grief -- denial, anger, depression. In Appalachia, Bailey says, there’s growing acceptance that there won’t be a boom this time around to follow the coal bust.

SOURCE: Quarterly data, Kentucky Energy and Environment Cabinet

During the presidential campaign, Donald Trump promised to restore the coal industry to its former health. “Let me tell you: The miners ... they’re going to start to work again, believe me,” Trump said this spring. “You’re going to be proud again to be miners.” Along with other Republicans, he castigated Hillary Clinton for saying, “We’re going to put a lot of coal miners and coal companies out of business.” She was trying to express, however clumsily, a desire to assist Appalachia, referring to her $30 billion plan to help retool the economy in coal-producing regions through heavy investment in infrastructure, schools and tax incentives for companies that do business in coal communities. Her proposal barely got a hearing in the areas it was designed to help. Trump beat Clinton by 30 percentage points in Kentucky, while Republicans took control of the state House for the first time in more than 90 years. “Eastern Kentucky was a large part of the story,” says Stephen Voss, a political scientist at the University of Kentucky. “It’s a region, along with the rest of Appalachia, that has moved to the Republican Party because of energy policy.”

Trump has made clear his intention to scrap Obama’s Clean Power Plan, which would have cut back on carbon emissions from power plants. Coal stocks rallied strongly in the days following Trump’s election. But beyond a general desire to promote fossil-fuel development, Trump hasn’t ever outlined his ideas for helping mining areas, or how they could overcome market forces that were dragging them down long before Obama’s presidency. In any event, it’s not certain that Congress would rush to embrace any aid package. This year, U.S. Rep. Hal Rogers, a Republican who represents Eastern Kentucky and chairs the House Appropriations Committee, gained no traction with a $1 billion package to invest in coal communities. The plan had support from the Obama White House, but ran into opposition from Wyoming Gov. Matt Mead and other Western politicians who didn’t want to see money that had been collected from the industry for mine cleanup efforts redirected to local economic development programs -- especially if those programs were taking place in some other state.

Given the relatively localized effects of coal’s decline, that type of parochialism is something any federal package would have to overcome. “When push comes against shove, do people really care about mining communities and hillbillies enough to reinvest?” asks Dee Davis, president of the Center for Rural Strategies in Whitesburg, Ky.

For such a small place, Harlan County has long played an outsized role in the national imagination. Back in the early 1930s, a coal strike turned violent, leading to one of the nation’s most protracted labor disputes, one that was well-documented by outside media. So was another long and painful strike in the early 1970s, the subject of the Academy Award-winning documentary Harlan County, USA. More recently, Harlan has provided the backdrop for the television series Justified.

The county’s population peaked in the 1940s at about 75,000 -- more than double its current size. The reason, of course, was coal. Back in the pick-and-shovel era, there could be more than 100 people working at the face of an underground mine, digging for coal and bringing it to the surface. Today, thanks to mechanization, there might be seven people doing the same work. And using the technique known as mountaintop removal, the same amount of coal can be extracted by just two people. Meanwhile, the rich seams that made Eastern Kentucky so attractive for mining have mostly been dug out, leaving thinner deposits behind. “I think in some form or other, they’re going to be mining coal in the hills of Eastern Kentucky for the next 100 or 150 years,” says Miller, the Kentucky River Area Development District director. “Do I think it’s ever going to produce 100 million tons a year again? No, I don’t.”

Even a decade ago, in the wake of wars in the Middle East that lifted up prices for energy commodities, the region’s coal fetched up to $100 a ton. Now, Kentucky coal prices are below the cost of extraction, which is roughly $60 per ton. About 85 percent of the coal mined in Kentucky last year was shipped to 89 power plants. Of that amount, 16 percent was sent to plants that have since closed or are scheduled to stop using coal by 2019. In Harlan County, there are fewer people working in coal mines today than the number of miners who were scabs and kept working during the strike-afflicted Depression years. Across Kentucky as a whole, employment in the coal business is lower than it’s been since the 19th century.

Hence Mosley’s focus on diversification. Like his peers in other Appalachian areas, he is hoping to attract new enterprises to his county. Harlan was so stuck in a coal mindset that it never even thought in terms of formal economic development efforts until the last few years. In October, Mosley hired the county’s first full-time, certified economic development manager. “We need somebody every hour of every day doing nothing but economic development,” he says. “That’s what we’ve lacked in the past and it’s flat-out cost us in doing additional recruiting here.”

So far, the success stories are small-scale affairs. The county is applying for grants to help convert an old industrial site it owns into a wood pellet facility. Earlier this year, it saw the opening of a teleworks hub, which trains residents and connects them with distant companies for support jobs they can do on the phone. That’s put about three dozen people to work over the past few months. “Some people who were in the coal business opened a firewood bundling facility,” Mosley says. “They have a contract with different retailers. That’s put several people to work.”

When you’ve lost hundreds of jobs, “several” doesn’t sound like much. And every time a new company comes to town, it can take 18 to 24 months of visits and board meetings and a long permitting process before its doors will open. That’s why Mosley and Larry Calhoun, the new Harlan County development director, are working to get some projects in the pipeline. If you don’t start, Calhoun says, you can’t finish.

The story is the same all over coal country. In the next breath after diversification, local officials often say the word “tourism” -- ecotourism, cultural tourism, adventure tourism. The beauty of tourism is that it brings in people to spend money without being much of a burden on infrastructure. “Folks are looking at tourism, trail towns or the history of mining,” says Bailey of the Kentucky Center for Economic Policy.

But there are only so many places that can offer heritage tours or install zipline thrill rides and expect to draw enough visitors to support a substantial number of jobs, especially when there are going to be lots of competitors within a given region. Tourism jobs tend to be seasonal and don’t pay very well anyway. That’s why another huge piece of the puzzle for communities seeking to reinvent their economies is education. Any county with a community college is talking about using it to train residents to suit any job that might come along, whether it’s a skill such as welding or an effort to turn coal miners into digital code writers.

The Kentucky Valley Education Cooperative, which includes 19 school districts in the southeastern part of the state, was originally formed to pool their purchasing power and save money on basics such as toilet paper. Now it runs all kinds of joint training ventures -- participating in computer hackathons for rural health, instructing kids on aviation and aeronautics, helping students combine coal spores with algae to create a new biofuel. The results have been impressive. The percentage of high school students who are assessed as ready for college or careers is nearly 90 percent -- up from less than 60 percent five years ago. “We aren’t so crazy to think we can just train people for jobs that don’t exist,” says Jeff Hawkins, the cooperative’s director. “We have to train them in technical areas for jobs that they can get immediately.”

That points to a chicken-and-egg problem for communities such as Harlan that are attempting to reboot their economies. Do they invest in education and training in hopes of creating a pool of workers that will lure new companies, or do they try to bring in companies first and then promise they can train enough residents to do the kind of work that’s needed? Mosley admits that the county has spent money in the past training people for jobs that did not exist locally. It doesn’t take long for that to seem like a losing game.

But Mosley insists that former coal workers have talents transferable to other industries. People who still picture coal miners as holding picks and shovels in their hands haven’t kept up with the field. Mechanization eliminated a lot of jobs, but it gave workers a broad set of skills -- part miner, part electrician, part engineer -- that equips them to handle surprise at every turn. “Their work ethic is second to none,” Mosley says. “These people will crawl into the side of a mountain and never see the light of day to feed their family. Imagine what they could do for a company with good working conditions.”

Training those people in new lines of work -- and making that work available -- is a real test. Despite the long and now seemingly permanent decline in the industry, mining is still central to the Appalachian identity, in the same way that people in Kansas think of themselves as farmers or people in the Pacific Northwest see themselves as loggers. “Coal has moved a lot of people out of poverty into the middle class,” says Davis of the Center for Rural Strategies. “It’s been a friend. It’s just not our future.”

It won’t be easy growing a new economy in fits and starts, a few dozen jobs at a time, but it’s imperative that places like Harlan County start the process. Trump will be a friend to coal, but whether Washington can revive struggling coal regions remains in doubt. Earlier federal help, from the War on Poverty in the 1960s to Promise Zones in the past decade, has done some good but never succeeded in remaking Appalachia. “We’re never going to get to where we need to be until we realize that our solutions have to come from us,” says Hawkins of the education cooperative. “We have to break the pattern of people coming from somewhere else and telling us what we need to do, and then leaving three or four years later.”

Calhoun, Harlan County’s new economic development director, just relocated from Texas. He’s worked in the field long enough to remember when Houston was decimated in the early 1980s because oil hit $9 a barrel. “The situation there taught us that diversification is the answer,” Calhoun says. “The city of Houston began to attract new types of businesses. That’s why the latest oil crisis in Texas is not as severe.”

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