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Catching Fire

Residents of Colstrip, Montana scoff at the preconceived notions outsiders have of their town. “To me, it seems like the impression of Colstrip is that we’re a horrible, hazy place where people are dying of cancer. I get that impression, and it’s not true,” remarked long-time resident Donna Tauscher. Her beliefs are commonplace in coal country — locals see something special in their hometowns often unappreciated by outsiders. In the 1970s and ‘80s, people like Tauscher came in large numbers to Colstrip, an aptly-named town home to a major coal mine and the second largest coal-fired power plant west of the Mississippi River, creating a community known for its friendly faces and economic stability.

While Colstrip’s residents might feel their community is somehow distinct from other coal towns, which now have a well-earned reputation for economic depression and environmental degradation, the town is not immune to these problems. For decades, coal has reigned king in parts of the United States — which still draws 39 percent of its energy from coal — including the windswept prairies of eastern Montana and Wyoming, the rolling hills of northern Alabama and southern Illinois, and its traditional stronghold in Appalachia. In these parts of the nation, the industrial work related to extracting and processing coal has created a reliable economic backbone, promising long-term, high-paying jobs for those willing to weather the ups and downs of living in company towns and the stress of dangerous working conditions.

The long-term viability of this economy has come under increasing scrutiny in recent years, and not just from activists preaching the environmental ills of coal use and extraction. More than ever, a mix of threats ranging from greener government policies to new technologies and changing market conditions challenge coal-producing regions’ economic engines. These factors have forced policymakers and business leaders in coal country to embrace the once-heterodox idea that their local economies need to diversify to stay alive.

Colstrip provides an illustrative example of some political and regulatory challenges facing the coal industry. The town, first settled in the 1920s to supply coal for locomotives on the Northern Pacific Railroad, saw enormous immigration and development in the 1970s as strip mining took hold in the region and the 1973 energy crisis sparked the the construction of the Colstrip Power Plant. The region attracted young people from across the state and beyond, who were eager to find a welcoming, vibrant community and high-paying, life-long jobs.

Today, Colstrip is as welcoming as ever, and the high-paying jobs haven’t gone away — wages at the power plant range from $24 to $42 an hour, excellent pay in a state where the median wage is $15.15 an hour. The stability that once defined the local economy, however, has all but disappeared. In recent years, the Colstrip plant has come under fire for its environmental impact — by some estimates, it’s the 15th largest producer of greenhouse gases in the United States. Its emissions have made the plant, and thus the town, targets of both regional and national efforts to limit the United States’ contribution to climate change.

The Clean Power Plan, which debuted last December, is just one of these efforts. The Plan is part of the Obama Administration’s effort to reduce carbon emissions and curb climate change by empowering the EPA to set out specific state-by-state targets for reducing emissions of greenhouse gases. State governments work out the specific details, and Montana’s target was set at 47 percent, the second highest in the nation. This means that statewide compliance would likely require the Colstrip plant to shut its doors, putting 350 people in the small town of 2,300 out of work for the foreseeable future. In addition to the Clean Power Plan, Colstrip’s political and business leaders have been forced to grapple with legislation in Washington State that would force Puget Sound Energy, a major shareholder in the Colstrip plant, to shut down two of the plant’s four units in the next eight years.

Colstrip has had some luck in surviving these concerted political efforts to shut down its power plant; in February, the Supreme Court placed a stay on the implementation of the Clean Power Plan, pending a ruling by the Court of Appeals for the DC Circuit. However, this luck seems to be running out: After Justice Antonin Scalia’s death, most observers think the rule will ultimately be upheld. And despite Montana lawmakers’ work, the Washington bill is making steady progress through that state’s legislature. To make matters worse, Oregon’s governor recently signed a bill that directed the state’s utilities to eliminate coal power from their energy mixes by 2035, cutting 600,000 customers from Colstrip’s customer base.

The situation in Colstrip may look bleak, but the town’s prospects look quite rosy when compared to most other coal-producing regions across the United States. While the Montana town grapples with whether its coal industry will have a future, states such as Wyoming, Kentucky, and Alabama have already begun to see their former economic powerhouses slip into the past. Market forces have begun to favor natural gas, green energy, and foreign coal, leaving the American coal industry foundering — many states have already seen their coal industries decimate.

Myriad forces have led to a historic economic downturn for the coal industry — coal production has fallen 15 percent since 2008, and the industry has shed more than 40,000 jobs in the same period. In January, Arch Coal, the second-largest coal producer in the United States, declared bankruptcy due to “a confluence of economic challenges and regulatory hurdles [that have] hobbled the coal industry,” according to the company’s CFO, John T. Drexler. The state governments of Wyoming and West Virginia — which together account for more than half of the nation’s supply of coal — have seen budget shortfalls of hundreds of millions of dollars. Wyoming’s schools are funded directly by tax revenue generated from coal leases. Because the current economic situation has kept coal companies from filing new leases, the state’s school construction fund will be completely unfunded in 2017.

As Arch Coal’s CFO stated, some of this downturn could be attributed to adverse policies — the so-called “War on Coal” — dictated by EPA regulators in Washington or pushed through statehouses by environmentally-minded legislatures. This certainly appears to be the case in Colstrip. The economic challenges he cites are, however, probably more to blame for the tumult in the coal industry more generally. Increased coal mining in countries such as India and China has displaced much of the international market for American coal and driven American suppliers out of key coal-dependent industries such as steelmaking. Additionally, the rise of cheap natural gas has shifted demand away from its dirtier counterpart; in 2015, natural gas edged out coal as the top source of American energy generation for the first time in US history. Finally, decades of coal mining have stripped away all of the easily accessible coal in regions like Appalachia, leaving only less accessible deposits that require more expensive extraction techniques. This fact partially explains why coal producers like Wyoming and Montana, which still have large stores of cheap, accessible coal, are weathering the downturn better than states like West Virginia and Kentucky, which long ago exhausted their surface sources.

The turmoil Walter Energy has faced in recent years is emblematic of many of the larger economic issues facing the coal industry as a whole. Walter, one of the world’s leading producers of metallurgical coal — a product used primarily in steel production — has been a pillar of Alabama’s coal industry since the 1970s, producing millions of tons of coal. In the last forty years, the company has endured the same routine ups and downs that have historically characterized the coal industry, albeit always managing to come out on top. Recent shifts in global coal markets, however, exacerbated the problem. Increased global competition from metallurgical coal producers in China and South Korea drove prices in Alabama down from $88 per ton in 2013 to a low of $52.75 in June 2015. Walter was initially optimistic about its long-term prospects, but continued competition from cheap foreign coal and the rising threat of a shift away from coal towards greener technology in the steel industry ultimately led the company’s executive staff to conclude that the future of Alabama’s coal industry was tenuous at best. The company declared bankruptcy last July and sold off the last of its US holdings in February of this year.

It’s been clear for decades — in spite of oft-repeated claims of economic stability — that regions that depend too heavily on coal mining have suffered from economic depression. When President Lyndon Johnson declared the War on Poverty in 1964, he chose to focus on Appalachia, traveling to eastern Kentucky to showcase the consequences of American poverty and creating the Appalachian Regional Commission (ARC) to fight against poverty in the region. At the time, some parts of Appalachia suffered from poverty rates of almost 60 percent. While the Great Society programs of the 1960s and other subsequent reforms have succeeded in bringing down poverty levels from these heights, Appalachia remains one of the poorest, least-educated parts of the country. West Virginia has led the country in the percentage of its adults that are unemployed since 1979. Past attempts to create robust, diverse economies in coal-producing regions have struggled with the low levels of education and lack of easily developed land. John Deskins, the director of the Bureau for Business and Economic Research at West Virginia University, spoke frankly about the issues facing his state: “We have a mismatch between the job skills that employers want and the job skills West Virginians have. It’s a little bit grim.”

In the face of an unforgiving economic environment and a history of failed attempts at reform, it’s clear that business and political leaders in coal country need to radically rethink their state’s economic policy to ensure a future for coal towns like Colstrip. Fortunately, there are several promising policies that have emerged in the last several years that offer a visionary opportunity to rekindle the smoldering embers of coal country’s economy.

One auspicious initiative is the Obama Administration’s POWER+ Plan. The plan would provide federal funding on the order of more than $1 billion over the next five years to promote economic diversification, job training for displaced coal workers, and the development and implementation of carbon capture and other technologies that will increase coal’s viability in the short-term. The POWER+ Plan is designed to directly offset many of the impacts of recent market shifts, technological changes, and environmental policies (such as Obama’s own Clean Power Plan) that have been so harmful to coal country.

While Congress ultimately failed to find a place for the POWER+ Plan in the 2016 federal budget, many of the specific programs proposed by the Obama Administration did manage to become law, including a $90 million provision to promote economic development on reclaimed mine land and the allocation of $50 million to revitalize the ARC — the aforementioned federal-state agency that President Johnson created to fight poverty and grow the region’s economy. Additionally, members of Congress and the Obama Administration have continued to push for the passage of all of the POWER+ Plan’s provisions. In February, Representative Hal Rogers (R-KY) introduced the RECLAIM Act into Congress, a bill that, much like the POWER+ Plan, would provide $1 billion to coal-dependent communities over the next five years for economic development.

The work in Washington, DC presents a real opportunity for the economies of down-and-out coal towns, but it’s only part of the efforts underway. State governments, business leaders, nonprofits, and grassroots activists are uniting in coal-producing states across the country in an attempt to jumpstart languishing economies. An excellent initiative in this vein is Shaping Our Appalachian Future, or SOAR, a summit convened by Representative Rogers and former Democratic Kentucky Governor Steve Beshear that aimed to “expand job creation, enhance regional opportunity, innovation, and identity, improve the quality of life, and support all those working to achieve these goals in Appalachian Kentucky.” James Hurley, president of the University of Pikesville in eastern Kentucky, has joined many of his fellow Kentuckians in praising SOAR for starting a dialogue. “If it doesn’t accomplish anything else, what the Governor and Congressman Rogers did, they created a safe platform for leaders across Appalachia to talk about a new economy, a post-coal economy.”
Appalachians have supplemented that hopeful talk with concrete action. Organizations like the United Mine Workers of America have created job-training programs aimed at combatting the low levels of education in the region — in West Virginia, 42 percent of prime age adults had no more than a high school diploma, roughly twice the national average — by offering $5,000 grants to displaced coal miners hoping to finish their degrees or go through work certification programs. The ARC offers $40,000 entrepreneurship grants to those hoping to start new businesses in the region. Taken together, these efforts represent a powerful effort to change the conversation in these regions and promote economic development that can’t be upended by foreign coal or natural gas.

In January, Montana Governor Steve Bullock and State Senator Duane Ankney addressed a crowd of concerned citizens in Colstrip’s City Hall. In the wake of unsettling news about the impacts that the Clean Power Plan and legislation in Oregon and Washington would have on the town, the two politicians came together to announce a plan forward for the community and the state. To the assembled citizens, Bullock declared, “Some believe we can either address climate change or our economy. That’s a false choice; I know we can do both. But we need to stop assigning blame and we need to work together to find a Montana solution.” In finding that solution, Bullock and other leaders of coal-producing states would do well to look to Appalachia. As the once-reliable fire of the coal economy fades away, coal country will need to stoke the embers with radical ideas and dedicated initiatives.