POLITICS:

Can coal mining and gas drilling coexist in W.Va.?

When West Virginia Gov. Earl Ray Tomblin (D) touted coal during his January inauguration speech, it was considered par for the course. But when he also mentioned natural gas so prominently, it was emblematic of an economic and political shift now under way in the Mountain State.

Tomblin, recognizing the increased impact of shale gas development, told the crowd about the "tremendous opportunities" from drilling on both the Marcellus and Utica shale formations.

"The shale development and the potential economic growth and jobs that will come with the revitalization of the manufacturing sector are astounding," he said, "and West Virginia is right in the center of it all."

Coal may be king in West Virginia, but it is no longer as dominant as it once was. The rise in other power sources, particularly gas drilling, has led policymakers and advocates to start calling West Virginia an "energy" state, rather than just a "coal" state.

West Virginia has seen a decline in coal production and employment in recent months that will likely continue before leveling off, analysts have said. Because of global market trends and the increasing cost of mining some Central Appalachian reserves, production may never fully recover, especially for power plant use.

Shale gas extraction, on the other hand, has multiplied in West Virginia, from 297.9 billion cubic feet in 2010 to 394.2 bcf in 2011. A West Virginia University College of Business and Economics report said an increase in mining and logging sector jobs between 2007 and 2011 can largely be attributed to the Marcellus.

"At the end of the day, the nomenclature [that West Virginia is a] 'coal state' -- and some people would like to keep it that way -- is [that it is] really an 'energy state,'" said Corky Demarco, executive director of the West Virginia Oil and Natural Gas Association.

In a recent op-ed published in Coal Valley News in Madison, W.Va., Demarco wrote that shale drilling in West Virginia could help generate more than 50,000 jobs over the next two decades and $1 billion in annual tax revenues.

"Factor in the additional employment and revenues provided by oil production in West Virginia and the future looks even brighter," Demarco boasted.

"If you're looking at a long-term effect, I think we have the opportunity to bring back to this country a lot of the manufacturing that left here," he said in an interview, noting the use of natural gas in chemicals, transportation and other industries.

Natural gas is nothing new in West Virginia. It has long been a part of the state's history. "We've been producing gas in the state for over 200 years," Demarco said, noting that George Washington himself surveyed the first gas well there in 1771.

However, when asked whether natural gas would overtake coal as West Virginia's top fuel, Demarco, one of the state's top oil and gas boosters, said, "No. I don't think so. Coal has long been an establishment here."

Money and power

State Del. Tim Manchin (D), who helped lead hearings and write regulations for Marcellus Shale drilling in 2011, has seen the increased influence of natural gas in the halls of the state Capitol.

"Powerful. It was a powerful voice," he said about industry lobbying. However, Manchin added, "I think gas is gaining in influence, but coal is still king, in my opinion."

Manchin, a cousin of U.S. Sen. Joe Manchin (D-W.Va.), said it was often difficult to negotiate with natural gas interests during the legislative process. He said they initially expressed opposition to reforms and were more open to negotiations once the prospect of new laws became inevitable.

"When it was all said and done and we got down to legislative session, the special session, their voice was loud and clear then, and they started negotiating though the governor's office," Tim Manchin said.

That legislation passed to tighten regulation of natural gas drilling is an example of coal's stronger voice compared with the weaker political muscle of gas, noted one environmental advocate with knowledge of West Virginia politics. Many activists could not imagine state lawmakers taking such action against coal mines.

But Manchin thinks coal mines are more regulated than gas wells. Even though he says tougher drilling standards are helping prevent the gas industry from "draining the creeks dry and killing the bugs and the fish," many supporters of stronger legislative language were unsatisfied.

"It did not go as far as we thought it should go," Manchin conceded. "We did not do very much for surface owners. I mean, we did some important things."

Del. Mike Manypenny (D) was one of several lawmakers to vote against the legislation. "The governor had removed all the environmental and surface owner protections ... in favor of what the industry wanted," he said. "And so I was opposed to that."

Now Manypenny, who touts memberships in both the Sierra Club and the Chamber of Commerce, wants his colleagues to fill more gaps in natural gas drilling rules, including more chemical disclosure and water monitoring.

"Coal is still dominant because they have been around and have been the key player since day one," Manypenny said in an interview, adding that he thinks the natural gas industry is taking a "lesson from [coal's] playbook" by using "scare tactics" in lobbying.

"We always get slammed by the industry saying you're going to drive jobs to other states," he said. "However, I don't believe it."

As of January, there were about 30 registered lobbyists working on oil and gas issues in the state, according to the West Virginia Ethics Commission. The interests they represented include America's Natural Gas Alliance and Chesapeake Energy Corp.

Fewer registered lobbyists reported working on coal issues. However, not every advocate working on related issues is a registered lobbyist. And coal has strong defenders from the West Virginia Coal Association and individual companies like Alpha Natural Resources Inc.

Campaign contributions reflect coal's continued power. Tomblin received almost $300,000 from mining interests during 2011 through 2012, according to the website Influence Explorer, a project affiliated with the Washington, D.C.-based Sunlight Foundation. Money connected with electric utilities was around $114,000, and oil and gas about $100,000.

Coal-related companies -- including Alpha, FirstEnergy Corp., Consol Energy Inc. and Arch Coal Inc. -- were among Tomblin's top donors.

At the federal level, natural gas's campaign contributions have remained relatively stable, even with the industry's growth. Oil and gas interests funneled $131,450 to West Virginia candidates during the 2012 election cycle, compared with about $159,404 for 2010, according to Center for Responsive Politics figures.

Mining was by far the top contributor to federal political candidates in the Mountain State in recent years, CRP found. The industry also remains a focus of media attention.

"Where coal is over half of West Virginia, natural gas, at least at this point, is in fewer counties and in more rural areas, so there's less media coverage," Steve Roberts, president of the West Virginia Chamber of Commerce, said in an interview.

"What I would say is that public recognition of the importance of the energy industry is expanding to include both coal and natural gas," Roberts added. "And so from a public acceptance and public point of view, both industries enjoy widespread popularity."

Coexistence

Forecasters say coal may soon become the world's top energy source, surpassing oil -- primarily because of increased consumption in the developing world.

And while cheaper coal in other parts of the United States is vying for an export advantage, West Virginia boosters cite their lower-sulfur coal and metallurgical reserves for steel production.

"What we have in West Virginia is some of the world's best coal," said Roberts, who added that West Virginia coal burns so hot that the British Navy used it during its golden years.

"The disfavor that coal is receiving from Washington will not last forever," he said. "It's very unpleasant, it's very unfortunate, it's not based on good science."

And even though cheap natural gas is contributing to many utilities switching away from coal, rivaling coal as America's top energy source, both industries say the trend can't last forever.

"We just don't have the market for all this gas right now. Prices are depressed and there is some serious fuel switching," said Demarco, calling for natural gas exports and increased use of the product in cars and other industries. "Then that will take up a good bit of the gas that would maybe go to power plants."

As an example of fuel coexistence, West Virginia billionaire Jim Justice owns numerous coal mines but also has among his holdings the historic Greenbrier Resort in White Sulfur Springs, W.Va., which uses natural gas for at least part of its vehicle fleet, Roberts said.

Steve Forde, communications and policy vice president for the Marcellus Shale Coalition, pointed out that Consol Energy, a major coal producer and exporter, was among its members.

"We're seeing it firsthand that the two can coexist," he said in an interview. "A broad portfolio with coal, natural gas, all is necessary to move the country forward."

Still, West Virginia politicians are looking to gas to help diversify the economy and pick up at least some of the workers that coal has shed. The state's WorkForce West Virginia website features a prominent link for Marcellus training opportunities. And the agency prepared a report on economic opportunities from gas.

"We have a very deep bench in this area of know-how, of people who are trained, and I'm talking about chemistry and engineering. We have a lot of Ph.D.s here who know more about the gas industry than many places," particularly in the Charleston state capital area, Roberts said.

However, analysts point out that coal remains a more labor-intensive business and that gas may not be able to absorb all the job losses, even if laid-off mine workers wanted that option. A Labor Department report from last year showed oil and gas drilling specifically employs about 2,300 people in West Virginia, compared with about 22,000 for coal mining.

Counting several support activities, the workforce agency report showed more than 10,000 people working in oil and gas and closely related fields.

But Demarco said although colleges are ramping up oil and gas training efforts, the jobs are not necessarily located where the coal jobs once were.

"Not that the skill sets are diametrically opposed to each other, it's just a different type of extraction," he added. "And to the extent that we can get some of these folks retrained, I think there is some opportunity throughout the Appalachian basin."

Sean O'Leary, an analyst with the West Virginia Center on Budget and Policy, said increased severance tax revenues from drilling and a change in the distribution formula are helping localities weather the shock from the coal market's downturn.

In an issue brief in December, O'Leary said the state distributed more than $40 million in severance tax revenue to local governments, including almost $40 million from coal and more than $6 million from natural gas in fiscal 2011.

"From a revenue standpoint, natural gas will be able to replace some of the lost revenue from coal," O'Leary said in an interview. "We're sort of mining ourselves out," he said about West Virginia's coal prospects. "It's a finite resource, and we are starting to run into that."

In the name of coexistence, Demarco said, "Hopefully we'll get back to the point where we are producing, both of us are producing at our maximums. Because West Virginia today, you could change a coal state to an energy state."

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