Friday, February 19, 2016

The real cost of the “War on Coal”

Part One of a three part series that looks at the impact of mine closings in the area

 by Matt Hughes
J-E Editor

Last week the Supreme Court of the United States  (SCOTUS) made the decision to freeze the Obama Administration’s Clean Power Plan regulations. Some call it a large victory in the War on Coal, but has the much applauded SCOTUS ruling come too late for Kentucky and other coal reliant areas?

“Today’s Supreme Court ruling is a huge win in the fight against Obama’s disastrous Clean Power Plan,” Governor Matt Bevin said on Thursday. “The Court’s decision to freeze these illegal climate regulations is a victory in our efforts to save our coal jobs and protect Kentucky families from skyrocketing energy prices. We will continue to challenge these regulations as the litigations continue in court.”

Kentucky is among a coalition of states challenging the EPA rules. On January 21, the Kentucky Energy and Environment Cabinet joined with other states and stakeholders to submit comments to the EPA regarding the Federal Plan Requirements for Greenhouse Gas Emissions and implementation of the Clean Power Plan.

“Today’s ruling by the Supreme Court is a big victory secured by my office and a bipartisan coalition of AGs across the country,” said Kentucky Attorney General Andy Beshear. “Kentucky’s coal industry and miners have been decimated by guidelines that, up to now, they have not had the standing to challenge. Regardless of where you stand on these issues, the federal government must follow the law. The EPA guidelines simply are not allowed under the law.”

The SCOTUS ruling may take some of the heat off of the coal market, unfortunately a lot of time has passed since the regulations first went into effect. While the ruling might change the law, it isn’t a magic reset button that can put the industry back to where it was seven years ago.

Over the last three years, the country’s coal producing regions have been devastated, as coal burning power plants have been shuttered and gas burning plants were constructed in their place. Because of the high cost of gas conversion, reversing course for many of those plants is nearly impossible.

In Muhlenberg County, Kentucky, the Tennessee Valley Authority (TVA) announced in November of 2013, plans to close units 1 and 2 at its Paradise plant, and spend an estimated $1.1 billion to build a natural gas-fired plant at the site. TVA CEO Bill Johnson blamed increasingly stringent environmental regulations and flat power demand for the decision. That new facility is scheduled to open in 2017.

That is just one change that directly affected the coal mines in western Kentucky, but similar changes have taken place across the country.

At the same time it announced the Paradise project, TVA also announced the closure of six coal plants in Alabama.

According to Kentucky Coal Facts, in 2015, Kentucky Coal mines produced 61.4 million tons of coal. That is a 20.7 percent decrease from 2014, and the lowest number the state has seen since 1954.

Of that amount, 33.4 million came from the Illinois Basin of western Kentucky, with Hopkins County being third on the list (6.8 million tons) of coal counties in the region and Webster County at fourth (5.9 million).

The two counties combined to make up 1,292 of the 3,324 coal mining jobs in western Kentucky during 2015, down from 1,660 in 2014.

Of course all of that changed when Alliance Resource Partners (ARLP) issued WARN notices at Sebree, Warrior and Elk Creek Mines. The last day for miners at Sebree was January 6, 2016 while miners at Warrior and Elk Creek have until April 6, 2016. Those three mines combined for an 600 to 800 underground and surface jobs.

While the loss of employment for such a large number of workers is difficult, it only tells part of the story. The mine closings also impact the trucking companies, the railroad, the barge lines, the parts suppliers and vendors that all did business with each of the mines.

It also directly impacts the utility companies that sell power and water to the mines and the counties that collect coal severance taxes.

“Everyone who supplies the mines will be hard hit,” said Hopkins County Judge Executive Donnie Carol. “We really don’t know how many lives in the county it will effect, but we know it will affect the entire area.”

Webster County Judge Executive Jim Townsend estimated that the county will see a one third reduction in the amount of LGEA (Local Government Economic Assistance) money that comes in from the state due to a loss in coal taxes from the loss of the mine at Sebree.

Kentucky Revised Statute (KRS) 42.455 created the LGEA during the Patton Administration, setting those funds aside for coal counties to improve the quality of life for local residents.
“That money will just go away,” said Townsend. “Those LGEA dollars fund the senior citizens program, our fire departments, meals on wheels, the Webster County Dog Shelter and even the Sheriff’s Department.”
Those LGEA dollars had already been in decline, as the loss of coal jobs in the eastern Kentucky coal fields slashed the amount of monies going into the pot.
Carol said Hopkins County had expected to receive $1.4 million this fiscal year from coal severance monies. As it stands, the county government has only seen $332,000.
“A lot of things will be affected by this,” he added. “At this point, all we can do is pray and hope things get better.”
Possibly the hardest hit area in Webster County will be the county’s solid waste and recycling program. The county currently operates two solid waste and recycling centers that are free for county residents and property owners, but the program is funded with LGEA dollars.

“We’ll have to do something with solid waste,” Townsend said.

One possible outcome, according to Townsend, is that residents will have to pay a per bag rate on all garbage disposed of at the solid waste centers. Not only will that impact rural residents, it will also be a hit on residents of Clay and Dixon where the city doesn’t provide curb-side trash pickup.

The Webster County Water District has already had time to see a noticeable drop in water production and sales since Sebree Mine ceased production in November.
“The loss of revenue from the mining industry could really hurt us,” said WCWD superintendent Paul Lashbrook.

Water sales for the district have dropped from 27,503,590 gallons of water in September to a near record low of 19,312,070 in January. It is the lowest sales total the district has seen in at least four of five years, according to district officials. That total is nine million gallons lower than January of 2015, when the district sold 28,273,230 gallons of water.

“Sebree Mine was one of our largest customers,” added Lashbrook. “A year ago, the mining industry made up 30 percent of our revenue.”

The ultimate impact of the mining industry stretches so much further than the government agencies and utilities. The closings also impact the stores and restaurants where the miners shop and eat, and the schools where they children and grand children attend classes.
Join us next week for part two of this in depth look at the price of the ‘War on Coal’.

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