The Register-Herald, Beckley, West Virginia

Balancing Act

February 27, 2011

Boom could mean changes in state’s economy

The potential associated with a boom in industry such as the one some are betting will occur with the Marcellus shale could result in some big changes in the state’s economy.

Since the coal industry swept in during the early 1900s, it has played a significant role in the West Virginia economy.

The industry not only gave West Virginia miners an income and a job during the day, but entire towns and communities sprang up around the coal mines. According to adapted material from the West Virginia Geological Survey, two major peaks occurred in West Virginia coal mining in 1927 and 1947.

“Coal plays a significant role in West Virginia’s economy, contributing hundreds of millions of dollars in state and local revenue and providing well-paying jobs to tens of thousands of West Virginians,” reports the West Virginia Center for Budget and Policy. “However, the size of the coal economy, while substantial, is not as considerable as previous accounts suggest.”

A WVCBP analysis of the coal industry found that since reaching 170 million tons in 1990, annual production peaked at 177.5 million tons in 1997. In fiscal year 2009, $307.3 million in state revenue came from the coal industry via taxes such as the severance tax, corporate net income tax and the business franchise tax.

A collaborative study by economists from the Center for Business and Economic Research (CBER) at Marshall University and the Bureau of Business and Economic Research (BBER) at West Virginia University found that historically, coal in West Virginia has employed more individuals than in any other coal-producing state and has paid a “significant amount of taxes to the state and local governments.”

The loss of property tax revenue from coal companies would be fatal to local governments, the report states.

“Besides the economic impacts of the coal operators, the coal industry also practices corporate responsibility by continuing to improve and develop local communities in which they operate through educational activities; local sports support; support of local service departments; foundations and charitable organizations; and sponsorship of associations, clubs, councils, festivals and fairs,” the authors of the report wrote.

The report by the WVCBP paints a darker picture, warning that with the boom of an industry that depends on a limited resource, the danger of a bust may follow.

“As estimated in this report, the industry itself — including its direct and indirect employees — actually costs West Virginia state taxpayers more than it provides,” the report states. “Such an accounting is important, for projected declines in production, should they prove accurate, will further diminish coal’s contribution to state revenues, while the negative impacts resulting from coal industry activity will result in ongoing costs to the state and its citizens.”

— E-mail: tkuykendall@register-herald.com

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