In Colorado, for example, the Colorado Division of Reclamation, Mining, and Safety data show that coal production has dropped from 33,411,127 tons in 2001 to 18,726,445 tons today, with a peak in 2004. In 2001, Colorado had 12 coal mines. Today, only nine of these mines remain, with only seven of these mines producing.
But these trends are hardly unique to Colorado; in recent years coal production has fallen across the US and around the world. With increased mechanization and the application of new technology, coal employment has fallen even faster than coal production over the past several decades. Coal mining employment in West Virginia has fallen to less than one third of what it was in 1985, dropping from 178,300 to 56,700 in March 2016, according to US government data. There is no end in sight to the downward trend in coal employment; even if coal production somehow stabilizes, all indications are that the employment levels will continue to fall due to increased mechanization and other factors.
So what can the federal government and US states do to help workers and communities that rely on natural resource industries with boom and bust cycles, particularly the coal sector? One important step is establishing a natural resource fund to manage revenue from natural resource development in ways that can aid current and future generations in managing economic transitions. Many US states, including Colorado and West Virginia, have not developed such funds, and are failing to capture the potential long-term benefits of their natural resource development. This is an appropriate and important time to implement such measures, as the Department of the Interior is currently examining the existing regulatory and programmatic scheme for leasing coal—a system that has been in place since 1979. Natural resource funds place a portion of resource revenues in trust for future generations. In principle, income from such funds is then available to support education, health, economic development, and other local priorities even after mines have closed. Funds may also be utilized as “stabilization funds” to help manage the boom and bust cycles that are so characteristic of mineral resources.
According to the 2014 report “Managing the Public Trust: How to Make Natural Resource Funds Work for Citizens,” published by the Natural Resources Governance Institute (previously known as Revenue Watch Institute) and the Columbia Center on Sustainable Investment, US state governments have established natural resource funds in Alabama, Alaska, Louisiana, Montana, New Mexico, North Dakota, Texas, and Wyoming. The report adds that, on an international level, over $4 trillion has been invested in natural resource funds. Of the 54 active funds identified in the report, 30 had been established since 2000, showing that funds are an emerging and increasingly popular international trend.
The report identified six steps that promote good natural resource fund governance: (1) Set clear fund objective(s) (e.g., saving for future generations; stabilizing the budget; earmarking natural resource revenue for development priorities;) (2) Establish fiscal rules—for deposit and withdrawal—that align with the objective(s); (3) Establish investment rules (e.g., a maximum of 20 percent can be invested in equities) that align with the objective(s); (4) Clarify a division of responsibilities between the ultimate authority over the fund, the fund manager, the day-to-day operational manager, and the different offices within the operational manager, and set and enforce ethical and conflict of interest standards; (5) Require regular and extensive disclosures of key information (e.g., a list of specific investments; names of fund managers) and audits; and (6) Establish strong independent oversight bodies to monitor fund behavior and enforce the rules.
The report also emphasizes the importance of developing a process by which key stakeholders and the broader citizenry participate in development of fund objectives and apply pressure to adhere to the rules of the fund. In essence, establishment of a fund alone will not improve resource governance, but must be part of a responsible governance framework.
A natural resource fund that adheres to the recommendations described above is a key part of ensuring a fair return to taxpayers in Colorado and other coal-producing US states. As the BLM works to finalize its proposed reforms to the federal coal leasing program, it should include natural resource funds in these reforms.
Kristi Disney Bruckner is the Executive Director of Sustainable Development Strategies Group, a Colorado-based nonprofit working in the US and abroad to address the challenge of using natural resource endowments to reduce poverty, while protecting human rights and safeguarding the integrity of ecosystems.
The views expressed by authors are their own and not the views of The Hill.