In Fracking, West Virginia Sees a Second Chance

Despite a century of lucrative coal mining, West Virginia remains among the nation’s poorest states. Now, natural gas represents a new hope for turning resources into riches.

Mike Kasavich, a lifelong coal miner, exits his mine after a 10-hour shift. Mining jobs pay well, but the number of active miners has plummeted in West Virginia as the industry has grown increasingly mechanized.
National Journal
Patrick Reis
Oct. 27, 2013, 7:29 a.m.

West Vir­gin­ia’s coal built Amer­ica. It fired its steel mills, lit its homes, and provided the cheap en­ergy to cre­ate the wealth­i­est na­tion in the world.

But West Vir­gin­ia’s coal has failed West Vir­gini­ans.

The state re­mains among the poorest in the U.S., with a me­di­an house­hold in­come of just un­der $40,000. That’s $13,000 less than the na­tion­al me­di­an, more than $20,000 less than that of Vir­gin­ia, and more than $30,000 less than neigh­bor­ing Mary­land.

The poverty takes its toll: The Kais­er Fam­ily Found­a­tion ranked West Vir­gin­ia 48th in life ex­pect­ancy, with a pro­jec­ted life span of 75.4 years that ex­ceeded only Alabama and Mis­sis­sippi and was well be­low the na­tion­al av­er­age of 78.9. Un­der an al­tern­at­ive meas­ure of life ex­pect­ancy used by the Cen­ters for Dis­ease Con­trol, West Vir­gin­ia was dead last.

But now — after fail­ing to cap­it­al­ize on its first fossil-fuel boom — West Vir­gin­ia is get­ting a second chance to turn re­source riches in­to last­ing wealth: Nat­ur­al-gas de­vel­op­ment is ex­plod­ing there.

Through newly avail­able frack­ing tech­no­lo­gies, the state pro­duced nearly 400,000 mil­lion cu­bic feet of gas in 2011 — the latest year for which fed­er­al data are avail­able. That’s an in­crease of 50 per­cent over 2010, and more than twice what the state was pro­du­cing a dec­ade ago.

And the shale re­volu­tion is yield­ing big di­vidends for the state gov­ern­ment. Pro­du­cers pay 5 per­cent of their gas sales to state cof­fers in the form of a sev­er­ance tax. For fisc­al 2012, that amoun­ted to more than $90 mil­lion — up from $40 mil­lion in 2004.

But all that rev­en­ue is no guar­an­tee of last­ing prosper­ity. West Vir­gin­ia has been has been col­lect­ing taxes on coal since 1921 — the 5 per­cent sev­er­ance tax on it raised more than $500 mil­lion in 2012 — without those re­ceipts trans­lat­ing in­to wide­spread wealth.

Some of the state’s most prom­in­ent polit­ic­al fig­ures lament it as a missed op­por­tun­ity.

“If you could have a do-over, go back 100 years, my God, I think we’d be the most pros­per­ous and wealthy state in the na­tion,” said Demo­crat­ic Sen. Joe Manchin, the state’s former gov­ernor. “In a per­fect world, you would have laws in place that would have pre­ven­ted the ex­trac­tion without leav­ing any­thing be­hind.”

But state law­makers are de­term­ined that this time will be dif­fer­ent.

Jeff Kessler, pres­id­ent of the state Sen­ate, is push­ing a plan to set aside a full quarter of the nat­ur­al-gas sev­er­ance tax rev­en­ue in­to a “fu­ture fund,” money that would sit and col­lect in­terest while be­ing off-lim­its to cur­rent spend­ing. Kessler en­vi­sions the fund’s rev­en­ues be­ing spent on in­fra­struc­ture, edu­ca­tion, and oth­er pro­grams in­ten­ded to make the state more com­pet­it­ive.

“Hope­fully we’ll have the good dis­cip­line, foresight, and cour­age to do something for fu­ture gen­er­a­tions, in­stead of spend­ing every penny when we get it,” he said. “We’ve done that for 100 years. It’s time to do something dif­fer­ent.”

Kessler is mod­el­ing his ef­fort on a plan re­cently put in place by North Dakota, which is un­der­go­ing an en­ergy boom of its own thanks to shale oil de­vel­op­ment in the Bakken oil field. North Dakota has already squirreled away $1.3 bil­lion in­to their fund, which will be off lim­its through 2017, Kessler said.

Kessler is hop­ing to pass le­gis­la­tion start­ing a sim­il­ar fund dur­ing his state’s next le­gis­lat­ive ses­sion, which kicks off in Janu­ary. It will be his third try at passing the bill, which last ses­sion passed through a few com­mit­tees but couldn’t make it to the floor be­fore the ses­sion ended.

It is, after all, not easy to con­vince politi­cians to pass le­gis­la­tion that by design will not be­ne­fit their con­stitu­ents un­til after well after their next elec­tion. Kessler said his ini­tial plan was to put money away for 20 years, but he has since re­vised his ex­pect­a­tions.

“It’ll prob­ably be around 8 years,” he said. “I don’t think politi­cians have the pa­tience to wait 20 years for much of any­thing.”

Even that vis­ion, however, may not be an easy sell, giv­en the on­go­ing need for so­cial ser­vices in West Vir­gin­ia. In a state where nearly one in five people lives be­low the poverty line, it’s dif­fi­cult for politi­cians to ex­plain why they are spend­ing on the fu­ture when so many are des­per­ate in the present.

The need for so­cial ser­vices could grow if coal — whose con­tri­bu­tion to the state’s eco­nomy still dwarfs that of gas — be­gins to fal­ter. The fuel cur­rently faces a dual threat of in­creas­ingly cheap nat­ur­al gas and an un­friendly cli­mate in Wash­ing­ton, where the Obama ad­min­is­tra­tion’s new rules on moun­tain­top re­mov­al min­ing have made mine per­mits much harder to come by.

But that hand-to-mouth men­tal­ity is what landed the state in its cur­rent dire straits, Kessler said.

“I don’t ne­ces­sar­ily blame the coal com­pan­ies,” Kessler said. “It wasn’t their ob­lig­a­tion or duty or role to come in and say, ‘How can we cre­ate wealth for this state?’ It was a lack of foresight on the part of the politi­cians. I think maybe they were just so cer­tain that coal would be forever and so they didn’t have to worry about to­mor­row.”

Amy Harder contributed to this article.
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