State lawmakers met with Kentucky's top environmental regulator Tuesday to discuss the future of coal in the face of declining U.S. consumption.
Kentucky's coal production is down, power plants are burning less of the fuel and Eastern Kentucky coal remains among the most expensive in the region.
Industry declines have had larger impacts on rural counties that rely on coal for high-paying jobs and tax revenue.
At Tuesday’s meeting before the Interim Joint Committee on Natural Resources and Energy, lawmakers, industry representatives and environmental regulators discussed options for driving up production, bringing back mining jobs and making Kentucky coal more competitive among neighboring states.
One option tossed around by lawmakers: reducing taxes on coal in hopes it boosts sales.
“We’re not in the business to make coal severance money, we’re in the business to help people get jobs so that’s what our focus needs to be,” said Rep. Jim DuPlessis.
At one end of the discussion, a former coal mine executive and the current head of the Energy and Environment Cabinet joined the president of the Kentucky Coal Association to discussion coal’s outlook for Kentucky.
Opposite them, sat the co-chairs of the joint natural resources committee Rep. Jim Gooch and Sen. Brandon Smith, who just last month attended a two-day coal conference exploring alternatives for propping up the dying industry.
Two words not mentioned by Kentucky officials: climate change. Last fall, the Intergovernmental Panel on Climate Change reported the world needs to basically eliminate all of its carbon emissions by 2050, and that means finding alternatives to fossil fuels like coal.
The State Of Coal In Kentucky
Kentucky coal production has fallen dramatically over the last decade, but has plateaued in the last three years around 40 million tons. Meanwhile, employment remains flat between 6,000 and 7,000 industry jobs.
New mine permit applications have slowed to a “drizzle,” Snavely said.
At the same time, Kentucky is using less coal power. A decade ago, 94 percent of Kentucky’s electricity came from coal. Today, it’s at around 75 percent, with the difference made up mostly by natural gas and a small increase in hydroelectric generation.
Snavely said two coal plants have recently closed and another two are planned to close next year, but retirements will slow in the future.
“Coal-fired plants that exist in Kentucky are fairly modern vintage so I think we should level out and not have many future retirements for many years in Kentucky,” he said.
Sales of electricity are flat in the residential sector and the commercial sector, while they’ve declined in the industrial sector — mostly due to Century Aluminum purchasing electricity on the open market and the closing of the Paducah Gaseous Diffusion Plant, Snavely said.
Still, the price of electricity in Kentucky remains the cheapest east of the Mississippi and among the lowest nationally, which helps drive manufacturing to the state.
Coal Severance Taxes
Many of the Kentucky counties hardest hit by coal’s downturn are also reeling from a loss in revenues gleaned from coal severance taxes. Back in 2013, those severance taxes brought in more than $200 million. Today, it's around $94 million.
On Tuesday, lawmakers asked Snavely and Kentucky Coal Association President Tyler White about ways that Kentucky coal can remain competitive compared to neighboring states. Among the ideas lawmakers floated were plans to cut taxes and send them only to counties where the coal is mined.
“I’ll bring the elephant out in the room. I think that probably we could look at reducing the percentage of the coal severance tax in Kentucky and still send more coal severance money to our coal severance counties,” said Rep. John Blanton.
Gooch said the committee would look into the issue during the upcoming session.
Competition With Renewables
Snavely, the state’s chief environmental regulator, said he is pessimistic about the future of coal, particularly as the costs of renewable energy continue to decline.
“Coal now more than ever is going to depend on research and development to maintain the viability of the industry,” Snavely said.
But just as the discussion veered toward the costs of renewable energy versus coal, Gooch chimed in to cut the conversation short.
“We’re not going to let this committee today get into the discussion of coal versus renewable resources,” he said.
