New Study: Coal’s Net Cost to Virginia’s Budget in FY 2009 Was $22 Million

Posted By Lowell F. on December 14th, 2012

Back in 2011, a Harvard study found that “when the entire life-cycle of coal is considered — extraction, transport, processing, and combustion,” they add up to a cost to the American people of “roughly US$300 to US$500 billion…annually.” Also in 2011, we interviewed Professor Michael Hendryx of West Virginia University, whose research has found that coal mining “is a loser economically, environmentally, and in terms of public health.” Now comes yet another report, this time illustrating how coal is a loser for a coal-producing state’s budget.

previous accounts of the economic impact of the coal industry for Central Appalachian states have only presented coal’s benefits; our estimates provide an initial accounting of both benefits and costs. Such an accounting is important, for projected declines in [coal] 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 Commonwealth and its citizens.
[...]
Conclusions and recommendations. Every job and every dollar of revenue generated by the coal industry provides an economic benefit for the Commonwealth of Virginia and the counties where the coal is produced; however, the net impact of the Virginia coal industry, when taking all revenues and expenditures into account, amounted to a net cost to the Commonwealth of $21.9 million in Fiscal Year 2009.

The report goes on to issue a series of recommendations, including elimination of tax credits for coal production, ensuring that “funds for reclamation and water treatment of abandoned mines are sufficient for meeting all present and future needs,” increasing efforts (and funding) aimed at economically diversifying the coal producing region of the state, and overall reconsidering “state policy related to energy and economic development.”

Finally, it’s important to emphasize that this report’s estimate of a $21.9 million net cost to Virginia’s budget does not include the harm to the state in terms of damages to public health and to the state’s environment. The Harvard study reference above estimated costs as high as $500 billion for the entire “life-cycle” of coal in the United States. Apportioning that $500 billion evenly to the 50 states, Virginia’s share would be $10 billion per year. Add that to the $21.9 million net cost to the state’s budget, and you start to get an idea of how much of coal’s cost is simply not accounted for. Consider that the next time you hear someone talk about how coal is “cheap.”

P.S. I just saw an interesting quote by the report’s lead author, Rory McIlmoil: “As we have seen in other states, the coal industry provides jobs and revenue for state and local governments, but in all cases, including Virginia, the cost to the state and its taxpayers from supporting the industry far exceed the revenues.”

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