A new report released today takes a unique look at the economics of coal. Unlike traditional accountings, the report examines both the revenues and the expenditures related to coal industry employment, taxes and subsidies. The conclusion: in real spending, coal ended up costing Tennessee millions more than the industry provided to the state.

Conducted by Downstream Strategies of Morgantown, West Virginia, and the West Virginia Center on Budget and Policy, “The Impact of Coal on the Tennessee State Budget,” is one of a series of reports on coal’s real economic impact in Central Appalachian states.  

“While the coal industry provides significant benefits for the Tennessee budget, the industry also imposes substantial costs that impacted the budget in 2009, and that have accumulated from past coal industry activity. These are costs that, lacking a change in state policy, will be paid by the citizens of Tennessee for decades to come,” said lead report author Rory McIlmoil.

The report finds that the coal industry contributed just over $1 million to the state budget—less than one-tenth of one percent of the state’s total revenue in 2009. That economic benefit, however, was more than negated by the $1.6 million lost through state subsidies provided to the industry, and through expenditures for regulating the industry, for road repair, and for mine reclamation costs.
 
“We’ve long suspected that citizens, as taxpayers, carry an unfair share of the externalized costs of coal mining,” said SOCM Strip Mine Committee Chair, Cathie Bird. “This report takes us a huge step forward in trying to quantify some of the costs the people of Tennessee pay so that the coal industry can profit.”
 
The report finds that the size of the coal economy is not as considerable as the industry suggests. In fact, the industry actually resulted in an approximate net economic loss of $3 million for the people of Tennessee in 2009.
 
Several policy recommendations are made in the report to ensure that the costs are covered through revenues collected from the coal industry, rather than being paid for by the public. Among those recommendations:
 
  • Continue and strengthen the state’s efforts toward diversifying state and local economies in clean energy industries,
  •  Reduce tax expenditures supporting the coal industry,
  • Increase the coal severance tax, and base it on a percent of gross sales,
  • Collect a per-ton fee for the transportation of coal by haul truck,
  • Set a goal of reclaiming all abandoned mine lands to meet in-stream water quality standards, and ensure that sufficient funding is provided over time from the coal industry, and
  • Ensure that Tennessee’s bond forfeiture program is sufficiently funded.
 “The end of coal production in Tennessee is within sight as the cost of mining this depleted resource soars, along with the irreversible harm it does to communities and natural surroundings.  Corporations extracting profit from Tennessee's coal reserves must pay for the economic harm they create.  Tennesseans need to ensure that these costs are covered through revenues collected from the coal industry rather than being paid for by the public,” said Louise Gorenflo from the Tennessee Sierra Club.
 
A full copy of the report can be found at www.downstreamstrategies.com
 
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