Eastern Kentucky faces population loss and other challenges that complicate efforts to diversify its coal-dependent economy as the industry continues to bleed jobs, according to reports issued Monday.
Coal jobs in the region dropped by 6.1 percent from April through June, according to a report from the state Energy and Environment Cabinet.
That was far less than the 21.6 percent decline in the first three months of 2016.
Still, that was little cause for celebration in a place where the steep drop in coal jobs and production have hurt other businesses and revenue for local governments.
“We just keep getting hit,” said Knott County Judge-Executive Zachary Combs Weinberg. “We’re in a depression.”
In a separate report, the Federal Reserve Bank of Cleveland said the population of Eastern Kentucky is declining because of net out-migration and a death rate that exceeds the birth rate.
There is still migration into the region, but one challenge is that many who move in from other states are less educated, have lower incomes or aren’t in the labor force, according to the report.
That underscores the need to attract new jobs — including jobs that don’t require a college degree but pay a decent wage — as well as cultivating existing employers and entrepreneurship within the region, according to the report from analyst Matt Klesta.
There are efforts in the region to try to improve the economy and quality of life through initiatives such as Shaping Our Appalachian Region (SOAR) and One East Kentucky, which developed from a partnership of several chambers of commerce.
Those efforts haven’t yet replaced the lost coal jobs and wages, however, and it’s not clear when or if they will.
“We’ve got a long way to go,” said Byron Jacobs, president of the Bank of Hindman.
The report issued Monday by the state Energy and Environment Cabinet showed the number of coal jobs statewide dropped by 6.9 percent in the second quarter of 2016.
The estimated employment in the industry was 6,465 as of July 1, according to the report.
That means the state has the fewest miners since 1898, before the extension of railroads opened the way for explosive growth in production and jobs in Eastern Kentucky in the early 1900s.
The decline has been particularly steep in Eastern Kentucky since 2011. In the second quarter that year, coal employment in Eastern Kentucky averaged 13,695, according to the cabinet. The average for the same period this year was 3,764.
The downturn came later to the state’s western coalfield, but from April 1 through June 30, Western Kentucky lost a greater share of coal jobs, at 7.9 percent.
The number of tons produced also continued down. The drop was 13.1 percent statewide, 14.3 percent in Eastern Kentucky and 12.3 percent in Western Kentucky.
Production in the state’s eastern coalfield was the lowest since 1915, the report said.
Many reasons for decline
Analysts point to a number of factors combining to sap demand for coal, including competition for power-plant customers from cheap natural gas; tougher federal rules to protect air and water quality, which create an advantage for cleaner-burning gas; and the growth of renewable energy sources such as solar and wind power.
Eastern Kentucky also faces a particular challenge because many of the thickest seams have been mined out, creating higher costs to mine what’s left.
Production of coal from Appalachia for use in power plants, called steam coal, is relatively expensive compared to coal from other parts of the country and the amount produced per miner is expected to drop, the U.S. Energy Information Administration said in a report last month.
“This lower productivity further decreases its competitiveness with coal from other regions, as well as with other fuels used to generate electricity, such as natural gas,” the EIA said.
Coal was long a bulwark of the economy in Eastern Kentucky, in part because there were few other jobs in some counties, but that is fading with the downturn.
In 2012, for instance, coal jobs accounted for 36.2 percent of the wages from all industries in Knott County, but that level dropped to 13.7 percent in 2015, according to county-level data supplied by Manoj Shanker, an economist with the state Education and Workforce Development Cabinet.
In Harlan County, the coal industry’s share of wages dropped from 35.4 percent to 20 percent; in Letcher from 33.8 percent to 10.4 percent; and in Leslie County from 39 percent to 19.4 percent.
Coal jobs support other jobs, so the industry’s losses have a wider impact, said Bill Bissett, president of the Kentucky Coal Association.
‘It is so, so sad’
The net population loss from people moving out of Eastern Kentucky coincides with the downturn in the coal industry, according to the report from the Cleveland Fed, reversing a period of net in-migration.
Fayette County, with one of the state’s lowest unemployment rates, was the single biggest destination for people leaving Eastern Kentucky, the report said.
Frank Dixon, who lives in the historic coal town of Lynch in Harlan County, said a laid-off miner he went to church with finished moving over the weekend to Tennessee, where he found work at a rock quarry after looking unsuccessfully closer to home.
Dixon, 54, was laid off himself from a surface mine in December 2012 after more than 30 years in the industry. He was not able to get another coal job but qualified for disability payments because of several workplace injuries.
“The coal industry, it’s just continued to decline around here,” Dixon said. “It is so, so sad.”
Jacobs, the banker in Hindman, said houses owned by people who have died or moved away for work sit empty for months with for-sale signs in the yard.
“There’s no buyers,” he said.
The drop in coal production has slashed revenue that counties get from a tax on mined coal, forcing them to cut services and raise tax rates to deal with the loss.
Weinberg, the Knott County judge-executive, said the county received $1 million each quarter from one piece of the tax in 2009. Revenue from the most recent quarter will be $100,000, he said.
“It’s just devastating,” Weinberg said. “We’re lucky to keep the doors open.”
More job losses expected
The job losses are probably not over at the state’s coal mines.
That’s because 85 percent of the coal mined in Kentucky in 2015 went to make electricity at power plants, but many of those customers are slated to close before 2019, according to the Energy and Environment report.
While analysts suggest the coal industry nationwide has hit the bottom of its slide, that may not be true for Kentucky coal, Bissett said.
The Obama Administration has in effect imposed a ban on building new coal-fired power plants through emissions limits that are unreasonable and can’t be achieved with current technology, Bissett said.
“The market for Kentucky steam coal will only decrease and not grow again until we can build new coal-fired power plants in this country,” he said. “Beyond our two coalfields, every Kentuckian should be concerned about the loss of low-cost, reliable electricity that not only gives them one of the lowest electric bills in the nation, but also powers the economy of Kentucky in every county.”
The EIA projected in a report last month that production in the coal basin that includes Eastern Kentucky will trend down over the next 25 years even in the absence of a key administration proposal to slash carbon emissions from existing coal-fired power plants.
The rule, called the Clean Power Plan, has been put on hold during a court challenge. It seeks to improve air quality by reducing pollutants such as mercury and carbon dioxide from power plants.
If the rule is not put in place, production in Appalachia is projected to go down 50 million tons by 2040, compared to a drop of 79 million tons under the plan, EIA said.
Most of the decline that has happened or is coming is because of factors other than the Clean Power Plan, EIA analyst Elias Johnson said.
The plan would have a bigger impact in the coal basin that includes Western Kentucky, which is projected to have an overall increase from now to 2040.
Production there would increase by only 5 million tons by 2040 with the plan in place, compared to 86 million tons without the rule, the report said.