Coal has a net cost to Kentucky, study contends

The costs of coal production in Kentucky far outweigh the benefits, says a study by the Mountain Association for Community and Economic Development, based in Berea, Ky. It argues that the Kentucky treasury pays out $115 million more than the coal industry brings in.

The study examined direct revenues related to coal (severance tax, taxes on miners’ pay and mining companies) as well as indirect revenues from “sectors that serve those directly employed by coal,” finding Kentucky’s annual coal revenue is $527 million. The ability to produce such figures has long been the main basis for the industry’s support in the state capital of Frankfort. However, MACED contends there are costs of coal that go unaccounted for in public debate like those of mine safety, mine-reclamation enforcement, publicly funded coal research and development, and the cost of maintaining Kentucky’s coal-haul road system, which has higher weight limits for coal trucks. The report concludes that the coal industry costs the state $643 million a year.

Bill Caylor, president of the Kentucky Coal Association, told John Cheves of the Lexington Herald-Leader that he's sure such figures are inaccurate, and called the report "voodoo economics." MACED President Justin Maxson "said MACED favored the coal industry in several ways while conducting its study," Cheves reports. "It did not account for costs related to air and water polluted by mining and coal-fired power plants, or workers sickened or crippled by coal jobs." While MACED admits that estimates of "indirect" costs and benefits are difficult and should be considered cautiously, the organization says it hopes to to add a discussion of the total cost of coal to the public debate.

The study recommends that policymakers compare future investments in coal to investments in energy alternatives, pursue economic diversification and examine the way coal is taxed and subsidized in the state, saying, “Taxation theory suggests higher taxes on activities, like the mining of coal, which cannot be relocated to other states.” Cheves notes, "Of top coal-producing states, Kentucky gets the least from severance taxes — 2.9 percent of its tax income, compared with 7.1 percent for neighboring West Virginia."

The study's controversial message will likely lead to criticism and dissent in an economy where mineral extraction is so important. (Read more)