Study Evaluates Impact of Coal on Economy

 

 

By Trudy Balcom

September 21, 2018 -  A recently completed economic study for Navajo and Apache counties underlines the region’s dependence on coal for economic activity, high-paying jobs and tax income. But it also looked at how the counties can move to a more diverse economic base in the future.

The executive summary for a study entitled “Regional Economic Assessment & Strategy for Coal-Impacted Navajo and Apache Counties, Arizona,” was presented at a recent meeting of Real AZ Corridor. Navajo County hired Highland Economics, a consulting firm based in Portland, Oregon, to conduct the study, with funding from a $104,000 federal grant to aid coal-impacted communities. The study began earlier this year and wrapped up in June.

The purpose of the study is to help the two counties identify ways to plan ahead, diversify and grow the local economy. While the coal-fired plants in Apache County are not presently scheduled for closure — unlike Cholla Generating Station in Navajo County, which is planned to close in 2025 — they will likely have a limited lifespan.

The study covered six factors affecting economic development for the area and offers recommendations for each based on their findings.

The six factors are: Current economic and demographic conditions, Type and magnitude of adverse economic impacts, Regional and community strategies for mitigating economic impact, Infrastructure needs for economic development, Economic diversification opportunities and Recommended priority actions and next steps.

Current Status

The study found both positive and negative factors in the region’s current status. The population of both counties is growing, although very slowly. Navajo County has a 1.3 percent growth rate, while Apache County has a .6 percent annual growth rate.

And while unemployment is high in both counties, there is a ready workforce — something that could be attractive for a new employer. Counting both the unemployed and the under-employed, there are 10,400 people in the two-county area that are potential employees, the study found. Also, the relative numbers of the population that are of working age is comparable to state and national averages.

Education levels overall in the two counties are below state and national averages, but some communities within the two counties have higher than average education levels, including St. Johns, Eagar and Pinetop-Lakeside.

Navajo County Economic and Workforce Development Director Paul Watson said that isn’t unusual in two counties as large as Navajo and Apache counties.

“If you look at the two counties as a whole, you are going to have areas that are more poverty-stricken, with lower educational attainment,” he said.

Coal-Dependent Economy

The study found that direct employment and income in coal mining and power generation in the two-county region is currently estimated to provide 1,170 jobs and $151.8 million in employee compensation including wages and benefits. That translates into 650 jobs and $83.6 million in employee compensation and 3.6 percent of employment in Apache County, which is home to the Salt River Project’s Coronado Generating Station and Tucson Electric Power’s Springerville Generating Station.

In Navajo County, where Peabody’s Kayenta Mine and Arizona Public Service’s Cholla Generating Station are located, the numbers are slightly lower with 520 jobs and $68.2 million in compensation. They collectively represent 1.4 percent of county employment.

Furthermore, jobs in coal mining and power plants are some of the best jobs in the region, paying an average of $91,000 annually, more than three times as much as the average annual wage for both counties, which is just over $28,000.

However, the footprint of the industry goes beyond just employment and compensation.

“Total employment (direct, indirect and induced) in all sectors of the economy supported by coal and power generation is estimated to range from … 2,200 to 4,300 jobs,” the study states. The study estimates total economic impact at $215-365 million, roughly divided equally between the two counties.

Tax revenues from the mines and the power plants is estimated at $69 million annually, with Navajo and Hopi tribal governments receiving about $40 million, $19 million to Apache County and $9.4 million to Navajo County.

Watson said he feels the numbers surrounding coal that were revealed by the study are pretty accurate. He also said that finding an industry that can fill the economic crater that will be created when all of the coal-related industries are gone, is a tall order.

He said that other natural resource extraction industries, like potash mining, is probably the only thing that could come close. He said potash could generate 750-1,000 jobs that offer similar compensation to the coal industry. But since potash prices plummeted some years back, industry has expressed little interest in developing new mines in the area.

Relying on industries that are market-driven, like coal and potash, Watkins noted, gives the community few options for its economic future.

“The issue becomes, from an economic development standpoint, we have very little control,” he said.

Industries with High Potential

The study also identifies industries with the potential to develop in the area, the probability that they will develop, the time frame it could take them to develop, and how many jobs they could offer.

Helium extraction, forest biomass and tourism (already a major industry) are listed as having a high probability of growth, but the number of jobs generated by these industries is 100 or less, except for tourism, which is listed as 100+ jobs.

The liklihood for the development of the potash industry, renewable energy, outdoor recreation manufacturing, agriculture and remote workers are listed somewhere in the middling range, with potash offering the most potential jobs.

The study points to the probability that a mosiac of different industries and businesses is the most likely future scenario for economic growth.

Charting a Path Forward

The study suggests that the region should embark upon a planning process that would engage people throughout the region, including tribal nations.

“Northeast Arizona needs to decide what it wants to be strong in and what its economic identity is, and then focus its infrastructure investments, quality of life efforts, workforce training, marketing and branding and business attraction/retention/expansion efforts accordingly,” the study suggests.

“As time/effort/money resources are limited, success depends on clearly defining (and likely narrowing) desired outcomes,” the study states.

The study goes on the note that attracting people who have moved away to come back the area, and attracting new residents with quality of life is one strategy to improve the economy instead of just trying to attract industry.

“Much economic development effort focuses on attracting firms; however, focusing on attracting talent is another approach,” the author’s state.

The study also points to the lack of broadband internet as a major barrier. “The single greatest infrastructure gap in Northeast Arizona that affects the viability of many potential economic development strategies and several target industries is “the lack of broadband availability and reliability,” it states.

Watkins said that he is encouraged by these suggestions. He believes that a different kind of natural resource development — one based on adventure recreation experiences, not resource extraction — can help the region grow, and possibly attract manufacturing companies that build outdoor-related products.

“We feel strongly that if we can focus on that and develop an identity on that, we can grow and attract businesses,” he said.

 

Watson said a process of engaging people and communities across the two counties for a planning process has not really begun yet, and that the county is still exploring it’s options for finding grant funding to support a planning process or simply working with others to do the job themselves.