1. ALAN COLLINS, PROFESSOR WEST VIRGINIA UNIVERSITY WV WIND WORKING GROUP OCTOBER 20, 2009 Opportunities for Wind Energy in the Coal Fields of Southern WV Wind versus Coal on the Coal River Mountain 1

2. CONTRIBUTING AUTHORS Evan Hansen, M.S. is the President of Downstream Strategies, LLC. Michael Hendryx, Ph.D. is an Associate Professor at the West Virginia University Department of Community Medicine, Research Director at the West Virginia University Institute for Health Policy, and Faculty Research Associate at the Regional Research Institute. Fritz Boettner, M.S. is a Senior Environmental Consultant at Downstream Strategies, LLC. 2

3. PRESENTATION OUTLINE Research problem Study area description and data Three scenarios (two wind and one coal), two perspectives (landowner and society) and methods utilized in the analyses Results – jobs, earnings, and local tax revenues Conclusions 3

4. RESEARCH PROBLEM Increasing amount of WV coal is surface mined by mountaintop removal – about 35-40% as of 2007 Fundamental environmental and social opposition to the practice of mountaintop removal. Many people want to stop this practice. Coal industry perspective of mountaintop removal – provides jobs, economic activity, and inexpensive coal for cheap electricity. Those people opposed to mountaintop removal want to show what society gives up when a mountaintop is removed to extract the coal? 4

5. RESEARCH PROBLEM This research was conducted during the fall of 2008 under a contract with the environmental consulting firm of Downstream Strategies. Funding was provided by Coal River Mountain Watch, Adam Lewis Foundation, and the Sierra Club. Being opposed to mountaintop removal, these organizations wanted to show that a “better” economic alternative to mountaintop removal exists. 5

6. RESEARCH PROBLEM A copy of this study is available at: http://www.coalriverwind.org/?page_id=143 6

7. STUDY AREA DESCRIPTION Coal River Mountain is located in western Raleigh County (near Boone County) in southern West Virginia. Our study area consisted of about 41,000 acres. Coal River Mountain is flanked by the Clear Fork and Marsh Fork of the Little Coal River. 7

8. The Coal River Mountain Study Area 8

9. SURFACE COAL MINING In the study area, three surface mines are proposed: Bee Tree, Eagle II, and Eagle III. Mining permits specify the tons of coal produced annually for a projected life of each mine. Over all three mines, total production is projected at 47 million tons. The valley fills proposed on Coal River Mountain would bury 901 acres, or about 1.4 square miles. Part of nine proposed valley fills that will bury about 9 miles of streams in the Clear Fork sub-watershed 9

10. Mountaintop removal mine permit boundaries 10

11. UNDERGROUND COAL MINING If mountaintop removal surface mining was not conducted on Coal River Mountain, how much of the 47 million tons could be recovered by underground mining? We projected 8.7 million tons (18% recovery) using room and pillar plus auger mining techniques. 11

12. WIND ENERGY POTENTIAL A 2006 study by the consulting firm WindLogics utilized computer modeling of wind speeds to classify the wind energy potential for Coal River Mountain based on projected average wind speed at 80 meter heights. 12

13. Wind energy potential on Coal River Mountain, Source: WindLogics(2006) 13

14. WIND ENERGY POTENTIAL We projected that it would be economically viable to place a total of 164 wind turbines on Coal River Mountain. Turbine placement was based on identification of areas on the mountain with gross energy production of at least 4.5 million kilowatt-hours (kWh) and a gross capacity factor of at least 30%. Spacing between turbines was assumed to be 3.5 times the rotor diameter. 14

15. GAMESA G90 * 2 MW turbines * Produces more power at lower average annual wind speeds (7-9 meters per second wind speed was projected for the proposed turbine locations ) 15

16. Turbine locations 16

17. WIND ENERGY IMPACT FROM MOUNTAINTOP REMOVAL Two impacts: (1) Conversion of bedrock to consolidated rubble requires turbine base to be buried deeper compared to pre-mining conditions. This added expense may threaten economic viability. (2) Mountaintop removal lowers the elevations along the mountain tops and ridges of Coal River Mountain. Lower elevations mean less wind energy potential. 17

18. LOWER ELEVATIONS OF COAL RIVER MOUNTAIN REDUCES WIND ENERGY POTENTIAL 18

19. METHODS We analyzed three scenarios for Coal River Mountain: (1) Mountaintop removal of coal (2) Wind energy development and underground coal mining (Conservative Wind) (3) Development of wind energy in conjunction with a local industry wind plus underground coal mining. Two perspectives were evaluated: (1) Society (2) Mineral resource owner and landowner 19

20. METHODS -SOCIETY The main societal benefits quantified were jobs, earnings, and economic output that result annually from each scenario. Only jobs and earnings presented here. Economic impact analyses were conducted using two input-output models: (1) IMPLAN (Minnesota IMPLAN Group Inc., 2008) for the coal mining, and (2) the Jobs and Economic Development Impact (JEDI) model (Goldberg and Tegen, 2008) for wind turbine development. 20

21. METHODS -SOCIETY Increased jobs and earnings were based on: direct, indirect, and induced effects. All social analyses were conducted at the county level with 2007 data (coal and electricity prices, costs, economic structure, and population) for Raleigh County, West Virginia. Additional tax revenue for Raleigh County was computed for wind development versus more coal mining. 21

22. METHODS -SOCIETY Time spans: Surface coal mining was projected over a 17 year period. Underground mining was assumed to span 15 years. Wind energy was projected over five, 20 year investment cycles. 22

23. METHODS -SOCIETY Difficult to accurately quantify externalities – many were not quantified. They include global environmental costs, tourism, property values, and cultural heritage. Quantified external costs of coal production included pre-mature human deaths and illnesses among the general public, death and injury to coal miners plus local environmental costs. These were subtracted from the analyses for income. 23

24. METHODS -SOCIETY Example: Valuing pre-mature deaths among the general public Hendryx and Ahern (2008) found that for every 1,000 tons of coal mined translates into an extra 0.021 annual deaths per 100,000 population among the general public. Exposed population: 15,109 people Tons of coal mined: 47 million for surface, 8.7 million for underground Computed impacts: 149 additional deaths in the mountaintop removal scenario and 27 in the wind scenarios One-half of these impacts were assumed to occur during mining and the other half occur after mining has ceased. Value of a statistical life was $6.9 million based on most recent figures recommended by the United States Environmental Protection Agency. Resulting annual cost was $30.5 million for the mountaintop removal scenario and $6.3 million per year for the wind scenarios 24

25. METHODS - PRIVATE Land and mineral owner perspectives were based on payments from royalties - a percentage of the gross revenues from coal or electricity. Royalty rates used were: 5.84% for underground coal and 7.01% for surface-mined coal. Wind royalties were assumed to be 3.5% of gross electricity sold. A Net Present Value (NPV) was computed for each scenario using a 12.2% discount rate. 25

26. CategoryNumbersDescriptionSources Coal types 20% Metallurgical 80% Steam Rounded percentage for Massey coal mines in 2006 and 2007 Massey Energy Company (2008) Coal prices Metallurgical: $68.15 per ton Steam: $46.98 per ton Three year averages (2005- 2007) West Virginia Department of Revenue (2008) Employment Underground: 135 Surface: 57 Annual full-time equivalent employees per million tons Underground: Data for 2007 for underground mines on Coal River Mountain (MSHA, 2008) Surface: Eagle II community impact statement Selected Assumptions and calculations utilized in coal resource development analyses 26

27. CategoryNumbersDescriptionSources Development cost$3.2 million per turbine Four examples gave an average of about $1.5 million per MW in 2007 for 2 MW turbines. $1.6 million is a close approximation and is approximately the reported average for eastern projects between 2004 and 2007. Tiffany (2007) Kildegaard et al. (2006) Hau (2006) Wiser and Bollinger (2008) Transmission line $8 million for 10 miles of 115 kV line Average of cost for transmission line construction in Vermillion, South Dakota and Texas City of Vermillion (2008) Texas Comptroller of Public Accounts (2008) Annual operations and maintenance costs $44,000 per turbine Service, maintenance, insurance, and utilities Tiffany (2007) Wind electricity price$61/MWh Capacity-weighted average for eastern U.S. wind projects brought on-line during 2006 and 2007 Wiser and Bollinger (2008) Landowner revenue$10,997 per turbine Assumes 3.5% of gross revenue from electricity generation with 30% capacity and 98% operation time Tegen (2006) Property tax revenue to Raleigh County $10,627 per turbine Annual average over 20 years based on Senate Bill 441 taxation rules Amburgey (2008) Selected assumptions and calculations utilized in wind resource development analyses 27

28. RESULTS - SOCIETY Society benefits reported here will be: A) the number of jobs created (full-time equivalents) B) employee compensation from the additional jobs created (earnings). Earnings will be reported both with and without externality costs. 28

29. Annual jobs for the first 30 years of each scenario 29

30. Cumulative jobs for each scenario 30

31. Annual earnings for the first 30 years of each scenario (not including externalities) 31

32. Cumulative earnings for each scenario (not including externalities) 32

33. Annual earnings for each scenario (including externalities) 33

34. Cumulative earnings for each scenario (including externalities) 34

35. RESULTS - SOCIETY Underground coal mining is important in wind energy scenarios. Without mining, jobs, earnings and output never exceed mountaintop removal in the conservation wind scenario. Even under the local industry scenario, the time to exceed earnings and output increases greatly (jobs only takes four more years). However, when externalities are included in the income calculations, wind energy without underground coal mining generates the largest cumulative earnings. 35

36. RESULTS - SOCIETY Only about $0.50 for every additional hundred dollars of severance tax collected from expanded coal mining would return to Raleigh County. This computes to an average of $36,000 per year over 17 years under the mountaintop removal scenario. Tax revenue from wind turbines was computed using the provisions of Senate Bill 441 passed in 2007. Averaged over 20 years, each turbine contributes $10,627 annually. All 164 turbines would then generate, on average, $1.74 million in property taxes per year. 36

37. RESULTS -PRIVATE Royalties from mountaintop removal generated a NPV of $63 million for the holders of land and mineral rights. Wind and underground mining royalties had a NPV of $19 million. Based on these results, it is not surprising that existing landholding companies prefer coal mining over wind farm development on Coal River Mountain. Put simply, landholding companies stand to profit much more from developing coal resources compared to developing wind resources. 37

38. CONCLUSIONS The results from these two perspectives stand in stark contrast. Land and mineral rights holders have ample economic incentive to encourage coal resource development rather than wind. Even if economic incentives favored wind energy, the presence of mineral right leases discourages any surface development on Coal River Mountain other than mining. 38

39. CONCLUSIONS While cumulatively greater, the economic gains from wind energy take time to surpass those created by mountaintop removal of coal. The local industry wind scenario would provide more cumulative jobs than the mountaintop removal scenario after 2033—only eight years after the mountaintop removal mines would close. With the conservative wind energy scenario, it takes approximately six decades to overcome the mountaintop removal scenario. 39

40. CONCLUSIONS Tax revenue to Raleigh County from wind development far exceeds that gained from additional coal mining. From a societal perspective, when combining local externality costs with local earnings, the mountaintop removal mines actually cost the citizens of Raleigh County more than the income they provide. The increased deaths and illnesses due to increased coal mining—combined with the environmental impacts— are costlier than the earnings provided by the mining. 40

41. Questions or Comments? Available at: http://www. coalriverwind. org/?page_id =143 41