Kentucky: 'War on Coal' Yields to Hope for New Economy

When Dan Mosley became head of Kentucky's Harlan County government this year, he promised - like those elected before him - to defend the state's beleaguered coal industry.

But Mosley also vowed to do something else for his county: help build a new economy based on something other than coal. "The best business I've seen in town lately has been the U-Haul business because people are moving out," said Mosley, a boyish-looking father of two, speaking after a community meeting in the century-old coal town of Benham. "The time has come to wipe away our tears," he says. "We have no choice but to diversify."

Talk of an economic transition remains difficult in eastern Kentucky, where you can still spot bumper stickers that read "Mine Every Lump" and statues honor coal miners. These are the people Kentucky Republican Senator Mitch McConnell says are victims of an Obama administration "war on coal" - hammered by onerous regulations on coal-fired utilities and a president infatuated with wind and solar power.

But while such rhetoric still resonates in Washington, many locals say they have accepted that, this time, the boom-bust coal cycle has settled on bust. In the shadow of central Appalachia's bright-green hills, citizens groups are joining local politicians and entrepreneurs to map out a future less dependent on coal.

Appalachia's challenge is not unique. Coal towns across the Western world have faced an economic abyss as the industry declines. Britain's state-owned coalfields were wracked by civil strife in the 1980s, when then-Prime Minister Margaret Thatcher stared down miners' unions in an historic confrontation that ultimately shuttered dozens of communities.

The UK's mixed experience in rebuilding those local economies offers a sobering lesson about the task ahead.

Across eastern Kentucky, the conversation about what comes after coal ranges from teaching ex-miners how to write software to turning old surface mines into cattle-grazing or hemp farms. It envisions bringing in businesses, such as call centers and heritage tourism that taps coal's history.

Among those taking baby steps are people like former mining engineer Rusty Justice, who tapped federal workforce training funds to hire 10 apprentices - including nine former coal workers - for a software and website development start-up, Bitsource he has co-founded. Justice is Kentucky's answer to businessman Michael Bloomberg's flippant remark at a 2014 energy summit that "You're not going to teach a coal miner to code."

"There is an urgency here now, a realization that our backs are against the wall and we have to fight to survive," Congressman Hal Rogers, a Republican who has represented Kentucky's coal-producing counties since 1981.

Rogers has been witness to the long decline. In Harlan County alone, the population has dipped below 30,000, dropping by nearly half in 30 years. Unemployment hovers around 18 percent - more than three times the national average.

Across eastern Kentucky over 7,000 workers were laid off in 2012 and 2013 as production fell by 40 percent, according to the Kentucky Coal Association. For every one direct coal job lost, at least three other that depended on it went too. (Graphic: http://reut.rs/1Q3wXYN)
         
BEYOND THE 'WAR'
While some residents blame environmental regulations for squeezing the industry, much of the decline is attributed to irreversible economic and technological changes. The best, easiest-to-reach Appalachian coal has already been mined. Cheaper, cleaner natural gas has become abundant, while coal jobs became more automated.

"We don't see a major resurgence at all in coal production in eastern Kentucky," said Len Peters, the secretary of the state's energy and environment cabinet. He agrees with Rogers that rather than one silver bullet the region's economy needs hundreds of "smaller bullets."

In 2013, Rogers and Kentucky's Democratic Governor Steven Beshear launched Shaping Our Appalachian Region (SOAR), a bi-partisan initiative aimed at helping businesses create jobs, attract investment and nurture entrepreneurship.

Under their auspices, Macquarie Capital will undertake a public-private project this summer to build a $250-$350 million broadband internet pipeline through Kentucky, using almost $50 million in state bonds and federal grants to bring crucial infrastructure to the state's isolated east.

In May, SOAR's second summit hosted over 1,000 people and U.S. Labor Secretary Thomas Perez, who announced $35.5 million in federal grants to help businesses market their products, re-train workers for non-mining jobs and support homegrown entrepreneurs.

Many of those initiatives are taking shape at grassroots levels.

Carl Buck Shoupe, a retired Harlan County coal miner, helped launch a residential energy efficiency program in Benham to help customers upgrade their heating and air conditioning units. "What's happening now finally," he says, "is that people are starting to realize that coal is out of here and it's not coming back."

A Lexington-based company called Freedom Seed and Feed is partnering with University of Pikeville to open the first federally permitted hemp seed and fiber farm in the United States. The company will grow the plant on abandoned surface mine sites, using the hemp for fibers in car interiors, clothing and building materials.

And this being Kentucky, there are always opportunities in bourbon: Irish-born local businessman Pearse Lyons wants to extend Kentucky's popular bourbon trail to Appalachia. Over 1 million tourists are projected to visit the state's distilleries by 2018, according to the state distillers' association, and Lyons who runs a conglomerate called Alltech started construction in February on a distillery and brewery in
Pikeville under a "Dueling Barrels" brand.

He says the new business can create 50 to 60 jobs and help turn Pikeville into a tourist destination.
            
RESISTANCE
Still, compensating for coal's decline remains a tall order in eastern Kentucky, which surveys show to have some of the highest worker disability rates and poorest health rates in the country.

Charles Snavely, the retired president of eastern U.S. operations for Arch Coal (ACI), said he welcomed new industries such as information technology but warned that nothing was available for those who need immediate relief.

"There is potential there but while over a long period of time you can refocus the education system to teach that type of work, what about all the people that are there right now?"

Yet Jay Williams, the U.S. Assistant Secretary of Commerce for Economic Development who, as the former mayor of Youngstown, Ohio, saw his city go bust with the decline of the steel industry, saw reasons for hope.

"We spent 25 years, lamenting, stuck, waiting," Williams said as he waited to address last month's SOAR gathering. "The conversation here has not only started sooner, but they've made significant progress early on."

Reporting By Valerie Volcovici