The demise of the Virginia coal industry
Posted April 17, 2015 by Lewis Loflin
According to local press reports Virginia coal production has declined 50% in the last 10 years. This has meant economic devastation in already distressed communities across Southwest Virginia.
Some estimates that coal mining employment was once over 6000 has now declined to little over 4000. The tonnage of coal mined has dropped 50%.
The estimated value of Virginia coal is approximately $3 billion. This accounts for 13% of the region's wages. Since July 2014 530 coal mining jobs have been cut in Virginia. Alpha Natural Resources has announced an additional 1100 layoffs while another company has pulled out of mining operations totally. Reference; Bristol Herald Courier February 2015.
What does this mean for the future of impoverished Southwest Virginia? The severance tax collected on coal was supposed to have gone to diversify the region's economy, but instead has been squandered on porkbarrel waste and get rich schemes for the affluent and politically connected.
Millions have been dumped into wasteful tourism development projects, clean coal and other forms of silly research, and corporate welfare to lure in declining manufacturing industries and low-wage call centers.
Nowhere is this problem more evident than in Grundy the County seat of the Buchanan County Virginia. In a town of about 1000 residents government has spent an estimated $250-$300 million to revitalize the town. What they got was Walmart. The Appalachian School of Law was one such scheme costing millions that press reports and rumors hint at it closing. They also located a pharmacy school in the town that seems to be doing OK.
In another instance in Dickinson County Virginia over $10 million has been spent attempting to lure in call centers. Several have come and gone in the same location never exceeding more than 200 employed at any one time.
The location today has a government contractor employing between 100 and hundred and 120 people by last reports. That's been a taxpayer cost of over $100,000 per job. They still proclaim to have created 1200 new jobs to this day. That's where your coal severance tax went to along with assorted other government grants.
None of this has been successful with the real industry being the economic grants themselves. The money and jobs temporary as they are revolved around spending the government grants with no definable standards of success or public accountability.
Why has central planning failed so miserably in Appalachia in general? The hypothesis that generous public subsidies to the well-connected and affluent will magically create jobs and prosperity for the broader public has failed. This is a myth that has been proven wrong year after year as Southwest Virginia in 2015 ranks near the bottom of every social demographic in the nation.
The problem isn't just political corruption such as that at Bristol Virginia Utilities that saw a former CEO slink away in the middle of night under a cloud of controversy, criminal investigations for misuse of company credit cards, and in March 2015 criminal plea bargains of several executives over a kickback scheme.
Bristol Virginia Utilities has been a large recipient of government grants touting high-speed fiber-optic as another dream to revitalize the Bristol and Southwest Virginia economy.
The result was a loss of two existing call centers and their one-thousand jobs flocked to Bristol Tennessee that also got high-speed fiber-optic and lured the companies to jump the state line collecting millions in corporate welfare.
But this crazy game between Bristol Virginia and Bristol Tennessee to lure each other's businesses across the state line has gone into overdrive.
Both sides of Bristol have collectively spent between $150 and $200 million on what we call the retail wars. Parks Belk for example jumped the state line from the Mall in Bristol Virginia to a new development in Bristol Tennessee on I-81. Known as the Pinnacle these are once again proclaimed new jobs when in fact they just jumped the state line.
The argument is shoppers will buy in Bristol Tennessee and not Bristol Virginia or Kingsport so the town can collect sales tax revenue. But what benefit is this to the general public to merely move around existing retail jobs and pay tens of millions of dollars in subsidies to underwrite it? Bristol, Kingsport, and Tri-Cities are not isolated little countries they pretend to be but their economy is interlocked. Local governments scheming infighting over sales tax revenue at the expense of their neighbors does nothing to combat our problems here.
Yet while Bristol Tennessee spent $25 million in retail subsidies Bristol Virginia has gone hog wild crazy handing out over $100 million in subsidies to The Falls off I-81 a few miles from the Pinnacle. While the Pentacle is anchored on Bass Pro Shop The Falls will be anchored on a Cabala's.
None of this makes any economic sense and the developers made it clear without the heavy government subsidies they would never located in Bristol. Just what benefit is this to the average resident of Bristol and Tri-Cities?
In another crippling blow to the Virginia coal industry Xinergy Ltd. and its subsidiaries have filed Chapter 11 in a Roanoke Virginia court. The company list about $50,000 assets and between $100 million and $500 million in liabilities.
These huge unpaid debts are also going to ripple through the region's economy. Other companies that depend on the coal industry and contracted to Xinergy may also end up in bankruptcy court. The reasons given as usual our environmental regulations, cheap natural gas, etc.
Environmentalists for decades have sought the destruction of the coal industry and they are getting their wish.
Reference: Bristol Herald Courier April 14, 2015.
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