By R. Brock Pronko

March 24, 2019 - In McDowell County, West Virginia, miners are still mining coal 5,000 feet below the surface in the Pay Car Mine in Kimball. It’s a dirty and dangerous job, as evidenced by the Sago Mine disaster on January 2, 2006, when a coal mine explosion in Sago, West Virginia, trapped 13 miners for nearly two days—only one survived. With an average starting salary for a coal miner out of high school at $60,000 a year, it makes the job worth the risk. A coal miner can live like a king in Kimball where the average per capita income is $21,452.

Unfortunately for the people and communities that depend on them, coal jobs have been waning as oil and gas jobs have been steadily on the rise. Nearly two-thirds of U.S. coal producing states lost coal mining jobs in 2017. But in West Virginia, jobs in the coal industry seem secure. In fact, the state gained coal mining jobs—1,345 in 2017, and 729 last year. It was the promise to bring coal jobs back to the state that helped President Trump win West Virginia over former Secretary of State Hillary Clinton by a whopping 41.7 percent in the last election.

“None of this [growth] would be possible without the 2016 election of President Trump, who has kept every promise he made to our coal miners and the people of our state,” said Bill Raney, president of the West Virginia Coal Association.

Bill Raney 

“He has one-by-one rescinded every anti-coal regulation enacted by the Obama Administration, and he continues to do more.”

Many of those new coal jobs are from new metallurgical mines that have been in the approval process for nearly a decade. On February 14, Arch Coal, Inc. announced it started construction on a new, world-class longwall mine in Barbour County, West Virginia, which will produce an estimated 3 million tons of premium, metallurgical coal, typically used for making steel, per year for sale to an undersupplied global marketplace.

But most coal mined in the Appalachia basin is thermal coal, which is used for home heating, cooking and power generation, and studies show that natural gas is more efficient for generating electricity than both coal and nuclear power.

In 2016, for the first time, more natural gas was used for power generation in the United States than coal, but that transition hasn’t happened in West Virginia. Only 1 percent of power plants in the Mountain State use natural gas to generate electricity; 92.5 percent still use coal. Comparatively, in Pennsylvania, 32 percent of the power plants use natural gas and 30 percent use natural gas in Ohio. But that doesn’t mean the oil and gas industry is nonexistent in West Virginia. In fact, McDowell County has 24 natural gas producing operators and 1,350 active wells, which produce 822.4 thousand cubic feet of natural gas.

The fast-growing oil and gas industry has overtaken coal as the top-paying employment sector in West Virginia, with average annual wages of $84,103 per worker. Last year, direct oil and gas industry jobs in West Virginia numbered 22,514, an increase of 27.8 percent over total average 2017 employment of 17,617. Total direct oil and gas industry wages rose from a little over $1 billion in 2016 to more than $1.5 billion in 2017.

Part of this growth is due to the massive pipeline build-out in the Appalachian Basin. According to data recently released by Work Force West Virginia, pipeline employment grew by 434 percent between the first quarter of 2017 and the second quarter of 2018, leading total direct industry employment to its highest level in years, which fueled West Virginia’s economy and its ballooning state budget surplus.

“These numbers show the tremendous impact pipeline construction and natural gas industry operations have on West Virginia’s economy,” said Anne Blankenship, executive director of the West Virginia Oil & Natural Gas Association.

Anne Blankenship

“Job growth from pipeline construction is resulting in economic boons in local communities in West Virginia in service industries, restaurants, hotels, material manufacturing, gas stations, etc.”

The debate now raging in West Virginia is how much of that oil and gas revenue should go to the state and what it should be used for. The West Virginia Education Association has targeted the state’s severance tax as a source to fund annual cost increases of $50 million for the Public Employees Insurance Agency.

Jay O’Neal, treasurer of the Kanawha County chapter of the West Virginia Education Association, advocates increasing the state’s natural gas severance tax—currently at 5 percent— as a funding source for PEIA. In a commentary last year, he said there is plenty of money available to PEIA without hurting working West Virginians because the revenue from oil and gas will continue to increase over time.

Blankenship addressed O’Neal’s proposal in a column she wrote in the Charleston Gazette-Mail last year by pointing out that West Virginia taxes on the severance of oil and natural gas are much higher than those in Pennsylvania and Ohio, and the price of natural gas is a critical factor in the amount of severance tax the state can collect; because the price varies, as does the amount of gas and oil produced, so too do the annual receipts.

Blankenship wrote: “As an industry, we support our teachers and our schools. Our employees live throughout the state, and we want the best for our children and our educators. Increasing the severance tax on oil and natural gas isn’t the way to fund PEIA. It’s an unstable tax and, if increased, will hurt the industry’s ability to provide jobs and grow the state economy.”

Not raising the severance tax is a point of agreement between West Virginia’s two energy industries. Unlike Pennsylvania’s impact fees, which only affect oil and gas producers, West Virginia’s severance tax is also levied on the extraction of coal. Last year, the West Virginia Coal Association asked legislators to enact a three percent reduction in the state’s severance tax, saying that the recovering coal industry is still “fragile.”

“The five percent to two percent severance tax reduction is something we’ve got to have in order to grow, or we will continue to lose ground,” Raney told legislators at a Joint Energy and Finance Committee hearing last fall.

Raney also suggested that West Virginia legislators enact an economic opportunity tax credit to entice coal companies to invest in West Virginia rather than other coal-producing states.