Revitalizing Appalachia

Appalachian coal communities need investment. Here's a new idea for how to fund it.

Appalachian Coal Communities Need Investment. Here’s a New Idea For How To Fund It.

Despite the fact that many conservatives like to argue a war on coal has been waged through clean air rules, the coal industry has been in decline for decades. In fact, several factors like mechanization, resource depletion, and competition from other energy industries — none of which include EPA rules — have contributed to the decline in Appalachian coal.

But no matter the reason, these communities that have helped power America for decades need and deserve investment. Today, the Center for American Progress issued a proposal aimed at revitalizing Appalachian coal communities. The report outlines how the federal coal-leasing program artificially props up the Western coal industry at the expense of Appalachian coal and recommends actions congress can take to correct this distortion.

The problem begins with a federal program for leasing coal on publicly owned lands which fails to ensure that mining companies pay royalties on the true market price of the coal that they extract. Because the federal coal program is fundamentally noncompetitive, the Department of the Interior is providing billions of dollars of de facto subsidies to western coal and artificially driving down prices. The distortion is particularly extreme in the Powder River Basin in Montana and Wyoming where coal sells for less than one-third the price of Appalachian coal. This price gives coal from the region a near monopoly on the U.S. coal market, according to some analysts.

This unfair system exacerbates the challenges faced by coal communities across Pennsylvania, Ohio, Kentucky and West Virginia. Here are just a few examples of the barriers facing Appalachian coal communities:

By ensuring that coal companies mining on federal lands pay their fair share, the federal government could generate millions of dollars for taxpayers that could be used to reinvigorate Appalachian communities that have been hurt by this unfair system. CAP offers two policy proposals that could correct this distortion and help Appalachia get back on its feet:

  • Option 1: Increase the long-stagnant royalty rate, minimum bid price and rental rate for federal coal sales. These standards have not changed in decades, and the royalty rate for federal coal remains out of line with royalty rates for other publicly owned resources, such as oil and gas, on the Outer Continental Shelf.
  • Option 2: Assess royalties based on the true market value of federal coal. Currently, the government assesses royalties at the first point of sale, which undervalues the coal by not taking into account the final price paid by coal consumers like coal-fired power plants. This proposal would ensure royalty payments align with the true market value of coal.

BOTTOM LINE: Appalachian coal communities are struggling in part because of an unfair and outdated federal policy that benefits the Western coal industry. Congress needs to act to fix this ineffective coal-leasing program and help Appalachia adjust to the changing energy economy.

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