In-State Economic Impacts of the Virginia Coal Industry and Potential Coal Production Declines: Executive Summary

Virginia Center for Coal and Energy Research

In-State Economic Impacts of the Virginia Coal Industry and Potential Coal Production Declines;
Carl E. Zipper.
VCCER 95-01. 30 pp. May 1995.
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Executive Summary:

Mining and transport of coal makes a significant contribution to Virginia's economy. Virginia's coal production has declined in recent years, from a 46.5-million-ton peak in 1990 to less than 40 million tons in 1994, and further declined are expected.

This study estimates contributions of Virginia's coal industry to the state's economy, and the potential economic impacts of continued production declines. Economic impacts of the Virginia coal industry include both mining and in-state transport of Virginia-mined coal.

The economic impacts of coal mining and transport include direct, indirect, and induced effects. Direct effects include employment, payroll expenditures, and state and local tax expenditures by Virginia's coal producers; baseline data from several sources were used to estimate direct effects.

A measure of the coal's direct effects, however, does not capture the full range of the industry's economic impact. A portion of the revenues received by Virginia's coal producers are spent in Virginia's communities to purchase goods and services. In addition, wages and salaries received by coal-industry employees, and by employees of supporting industries, support economic activity within the state. The business activities supported by industry and employee expenditures are called indirect and induced economic effects due to mining and transport of Virginia coal.

Table ES-1. Estimated In-State Economic Impacts of Virginia Coal Production and Transport in 1993, and of Potential Coal Production Declines.

Measure	Current Economic Impacts (total)	Current Economic Impacts (per million tons of production)	Potential Loss Due to Production Decline (per million tons of production)
Employment	37,500	926	876
Personal Income	$1.04B	$27M	$25M
State and Local Tax Revenues	$149M	$3.9M	$3.3M

Notes:
All figures include direct, indirect, and induced effects.

In 1993, the direct economic impacts of Virginia's coal industry included over 9,000 people employed, a $340 million payroll, and $36 million in state and local tax payments. Total economic impacts of Virginia coal went well beyond these figures. Total economic impacts -- including indirect and induced effects -- are estimated to have totaled over 35,000 jobs and $1 billion in personal income, statewide. Each million tons of coal produced in Virginia supports over 900 jobs and generates nearly $4 million in state and local taxes. The direct, indirect, or induced effects of Virginia coal are estimated to provide over 40 percent of the personal income received by residents of southwestern Virginia's seven coal-producing counties.

If Virginia coal production continues to decline, fiscal impacts will be substantial. Declining employment, payroll income, and tax collections will occur. These impacts will be most severe in the southwestern counties where coal remains the major industry, alternative employment opportunities are limited, and current unemployment levels are high. For each million-ton decline in Virginia coal production, apprroximately 90 percent of the associated employment and personal income currently generated by the mining and transport of that coal, and over 80 percent of the resulting state and local tax payments, will be lost by the state (Table ES-1).