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
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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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