Sean O’Leary: Presidents, EPA, jobs and contradicting everything you think you know about the coal industry

By By Sean O’Leary

It’s obvious — environmental laws and EPA regulations raise the cost of burning coal, which drives down demand. And, when demand goes down, less coal is mined and jobs are lost. That’s why President Ronald Reagan, who reined in the EPA and called the federal government “the problem,” was great for coal and jobs. It’s also why Barack Obama, whose EPA has been aggressively pushing environmental regulation, is killing the industry and thousands of jobs along with it.

To many people — perhaps most people in West Virginia — these points are, as I said, obvious. The only problem is that none of them is true.

First, consider the comparative change in employment in the coal industry in West Virginia during the first terms of American presidents since 1980.

That’s right, Ronald Reagan, whose administration championed deregulation and promoted domestic energy development, is neck and neck with Bill Clinton for the title of Greatest Killer of Coal Mining Jobs in West Virginia. It wasn’t until George W. Bush came along that coal mining jobs grew during a president’s first term. But, in that race, “W” is joined by one Barack Obama as the only other president under whom coal employment grew.

But wait, that’s only looking at the first four years. It wasn’t until Reagan’s second term that his policies had time to take hold and the economy really took off.

In fact, it only got worse in Reagan’s and Clinton’s second terms. In all, West Virginia lost nearly HALF of all its coal mining jobs under Reagan going from 55,500 when he took office to only a little over 28,000 by the time he left.

But, how could that be? The economy grew rapidly during Reagan’s and Clinton’s second terms. Didn’t demand for coal increase?

Yes, it did. But even as West Virginia coal production grew after 1980, the number of industry jobs continued to plunge due largely to automation and the growing prevalence of strip mining, which is less labor-intensive than underground mining.

Still, the EPA’s environmental regulations must have done some damage. Didn’t they?

Perhaps, but if they did, it’s hard to see it in the numbers. In the years before enactment of the Clean Air Act and the EPA, industry employment dropped from a high of more than 130,000 in 1940 to only 48,000 by 1970. Then, in the years following the EPA’s founding, the number of jobs dropped to about 22,000 in 2012.

Still, we must ask, why? What is it about coal industry economics that makes seemingly obvious relationships between production, jobs, and regulatory policy completely non-applicable? And what does it say about the value of West Virginia’s elected leaders’ railing and whining about the EPA and the “War on Coal”?

The answer to the first question is that, because demand for coal has historically been highly inelastic — meaning that it hasn’t varied greatly in response to price changes — increases or decreases in production costs have very little effect on total production and employment. Instead, coal producers have tended to convert the savings they’ve won through regulatory relief and tax incentives into added profits rather than investment and job growth. And, to the degree they have invested, it’s been primarily in technologies that increase productivity and reduce the need for workers.

In short, the common presumption that what’s good for the coal industry is good for jobs in West Virginia is a myth. And, with our elected leaders operating under that myth, West Virginia has lost 110,000 of the 130,000 coal mining jobs it once had. Of those, 80 percent were lost before the EPA was even founded.

The irony is that in the last few years, a time when low-priced natural gas has risen to compete with coal in the power generation market, and at a time when the cost of extracting much of Appalachia’s coal is skyrocketing due to the depletion of the best seams, coal employment in West Virginia has been generally stable, which means that, all along, coal companies had far more profit incentive than they really needed to keep mining coal and, therefore, most if not all of the regulatory and tax concessions West Virginia leaders granted to the industry were unnecessary.

We not only gave up tax revenues, we also gave up our clean water and clean air and even compromised safety standards that resulted in injury and death for many miners. And the sad fact is that we got nothing in return — certainly not jobs.

Sean O’Leary is author of “The State of My State blog, the-state-of-my-state.com and a book by the same name.

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