The Center for American Progress’ From the State House to the White House initiative describes how bold climate action by state, local, and tribal governments can be implemented at the federal level. In this video, Sean O’Leary of the Ohio River Valley Institute, Nancy Hirsh of the NW Energy Coalition and member of the Centralia Coal Transition Board, and Emmett Pepper of Energy Efficient West Virginia discuss how the retirement of a coal plant successfully led to local economic development and how the Centralia model can apply to other communities.
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Produced by Hai-Lam Phan.
Chris Chyung is the campaign manager for the State House to the White House initiative with the Energy and Environment War Room at the Center for American Progress.
Chris Chyung: Justice Louis Brandeis once said, “A single courageous state may, if its citizens choose, serve as a laboratory and try novel social and economic experiments without risk to the rest of the country.” Well today, state and local and tribal leaders are boldly taking on those risks and pursuing innovative legislation and executive action to shape the pro-climate, pro-labor, and pro-justice vision for the future.
Today, we’re joined by Sean O’Leary of the Ohio River Valley Institute (ORVI), Nancy Hirsh of the Centralia Coal Transition Board, and Emmett Pepper of Energy Efficient West Virginia. Welcome to you all, and let’s dive right in. Starting with Nancy, I was hoping that you could set the scene for us. What was Centralia, Washington, like while this coal plant—at the center of ORVI’s report and our discussion today—was operational, and what was it like afterward in the community?
Nancy Hirsh: Well, certainly as a major employer in the county, the coal plant was seen as a very positive part of driving the economic vitality of the community. So as a result, the proposition of its closure and transitioning to cleaner, renewable energy resources in the region had the community concerned, had the workforce concerned. And there were lots of negotiations with all of the actors, whether it was the company, the unions, the local leadership, as well as environmental advocates and the state, to try and map out a path for maintaining community vitality and investment in the region.
Chyung: Yeah, and you kind of highlighted it there on my follow-up question to that. So with Centralia being kind of a more rural part of the state of Washington—not really like Seattle, like a big cosmopolitan city—I imagine that the community could break down along partisan lines as well, somewhat, with folks in the union who might have been even more Democratic leaning or Republican leaning, frankly, being opposed to seeing their jobs gone, and then the green community also being on the opposite side of that issue. How difficult was it to set up the Coal Transition Board that you serve on and to make sure that you were getting all of that community engagement? How did you do that successfully, or do you think you did do it successfully?
Hirsh: Well, you know, negotiation is about give and take, and the Coal Transition Board has four community members and five workers from the TransAlta company on it. So, it’s a nine-member board, and we try and reflect what the interests of the community are. And we have three buckets of funding: one bucket for economic and community development, one for clean energy technology development across the state, and one for energy efficiency and low-income weatherization services. The first and the third buckets are only to be invested in the local community around the plant, so Lewis County and the neighboring county. The clean energy technology fund can be invested across the state.
Chyung: And Sean, backing up a little bit off of what Nancy was saying, I want to ask you, the author of this report by the Ohio River Valley Institute, what led to the demise of the coal plant overall, and what were your top takeaways from the research you put into this report?
Sean O’Leary: Well, as in many cases around the country these days, the demise of the Centralia coal-fired power plant was driven by two factors. One of those, of course, is that it was—and while it’s still in its last few years of operations, still is—the largest polluter in the state of Washington. And so that was a primary motivation, certainly for folks from the environmental community, to close it down. But the other factor—and this is one that folks in Appalachia are living with—is that economically, the wheels were coming off. The costs to keep the plant operating, and in a way that’s compliant with clean air regulations, were becoming overly burdensome for the company. It appeared that it was going to start losing money relatively soon.
And in those respects, yes, the situation in Centralia very much paralleled those that afflict a number of plants in communities in West Virginia in the Greater Ohio Valley. I think the other thing, though, going back to what Nancy said, is that not only was the situation with the plants similar, but the situations in the local economies were quite similar too.
Chris, you mentioned that Centralia is not in a metropolitan area. It’s a kind of little island out there halfway in between Seattle and Portland—not the kind of place where you see suburbs or bedroom communities. It’s a very rural community and a relatively small one. And it also, like many towns including Moundsville in Appalachia, has a historically distressed economy. I mean, for the past 20 years, the unemployment rate in Centralia consistently ran a couple of percentage points higher than the national average. And I often say to people from West Virginia and from Appalachia generally, if you were to all of a sudden find yourself waking up in Centralia, Washington, and looking around, it would look pretty familiar to you—because it is a town that has suffered many of the same challenges that Appalachian towns have.
And so, it was that similarity that caused us to look at Centralia as a model for Appalachia—and also by virtue of the fact that the transition plan that Nancy helped sculpt and that she now helps administer has produced absolutely stunning results. Since that plan went into place and funding began, in the four years following that, the town of Centralia and surrounding Lewis County have seen job growth at twice the rate of the nation, as well as overall economic growth at twice the rate of the nation. So in those four years, Centralia added 2,800 new jobs in an economy that only had 24,000 to begin with. And that is something. I can confidently tell you that there are many coal towns in West Virginia, Ohio, and Pennsylvania that would kill for that kind of job creation. It’s literally three times the number of jobs that are being lost from the retirement of the town’s coal mine and the associated coal-fired power plant.
Chyung: And Sean, being from West Virginia, I know you have some of that perspective of the West Coast. Not even West Coast, it’s more rural Washington-like in Centralia, an analog to West Virginia and coal town communities. But I also wanted to ask two more technical follow-up questions. How was the governance of the Coal Transition Board set up? Was the state Legislature or local elected officials involved? And two, where did the funding come from? Because there are going to be communities out there that say, “We can’t just tap into a multimillion-dollar line of funding in order to get the great programs that you guys are talking about. How do we make this happen in our communities?”
Hirsh: Well, the whole Coal Transition Board and the transition plan and closure agreement were set up through the Legislature. It was a bill that established the Coal Transition Board and what its structure would look like—basically the amount of money had been negotiated at $55 million, and the funds come from the TransAlta Corporation. So, in exchange for allowing the plant to operate longer—after they put on some initial clean air requirements [and] technologies to clean up the plant a little bit—the plant was allowed to operate for longer as part of a workforce transition and community transition plan that included investment in the community and in clean energy development. So that was all kind of stipulated and set out by the Legislature. The Legislature decided on these three buckets of funding, and the company agreed to make the payments. And they have been on time and in full since [TransAlta] started contributing the money into the fund in 2012. So, their last payments will go into the fund to cap it out at $55 million in 2024.
O’Leary: And I should add, Chris, to what Nancy said, the model for funding that she just described is one that’s available to lots of communities that face this kind of challenge. And that’s because—and Emmett can talk in greater detail about this—in the case of the Mitchell Power Plant, just south of Moundsville, West Virginia, which is in a community of comparable size and a plant that’s of similar size to the one in Centralia. The parent company that owns that plant, American Electric Power (AEP), will—if the plant is retired in 2028, rather than in 2040 which was the original plan—AEP will save almost $100 million in costs by retiring that plant sooner. And those savings, which are nearly twice as much as the cost of the transition plan in Centralia, do represent a pool of money that could be repurposed in a transition scenario to the kind of plan that has been set up. And that’s a scenario that plays out, or that can potentially play out, with respect to a number of coal-fired power plants that face imminent retirement.
Chyung: Yeah. Thanks for drawing that direct line, Sean, between where that dollar amount was arrived at, how it was funded, and how it was directly translated back to the community. Emmett, I wanted to get your perspective too, being involved in West Virginia with Energy Efficient West Virginia. With your eyes on the ground, is what you’re seeing similar to what you’ve seen in Centralia? Do you think this model is translatable? What kinds of things are the next steps in terms of the debate that’s happening there with the coal-fired power plants in West Virginia?
Emmett Pepper: Well, thank you. Yeah, I think that…well, first off, I’m really pleased to meet Nancy because it really is a great model, and I do hope that we can replicate it here. I think having the time in advance is going to be critical like we do have, if the Mitchell Power Plant does retire a little bit earlier. We would have seven years or something like that to plan for it. We also have an additional funding stream here—and I apologize, I don’t know the utility regulation structure in Washington state, but in West Virginia, we have regulating utilities—so the cost to ratepayers would be, if the power plant stays on longer, it would be about $300 million. And so, there’s taking a chunk of that money and investing it instead of spending $300 million to keep the plant open longer, investing a smaller portion of it. But over time, [funding] from ratepayer dollars in addition to some money from the companies I think is prudent. And that’s what the ratepayers are being asked to do.
And frankly, our public service commission just recently approved [it] and it’s complicated, but it’s not a final decision, and Kentucky’s similar regulatory agency has a say as well. But the point is that there are opportunities here, there are savings for ratepayers and also benefits to the community. I think that most ratepayers would support these sorts of spending on the local economy and helping preserve the local economy or even transitioning the local economy.
O’Leary: Yeah. I mean, I think, you know going to what Emmett said, the most important factor to consider—and that I frankly wish the West Virginia Public Service Commission had considered more closely—is that when you look at the economic impacts of the plant continuing an operation, as compared to those under a scenario such as the one that Nancy described in Centralia, this is not a case of environment versus jobs. It’s literally a case of fewer jobs that the plant and the downstream economy provides now, versus more jobs and more economic activity in the scenario of a transition plan that’s funded and applied in the way the one that Centralia is.
One of the factors that’s not really considered is that long before coal-fired power plants retire, they typically go through a long decline in utilization rates. And that’s certainly true in the case of Mitchell. And so already, in 2019, Mitchell was only operating at less than 40 percent of its capacity. That means fewer jobs. That means much less coal being used, which is an important factor in West Virginia. And frankly, going forward beyond 2028, the plant’s utilization rate is going to decline even further, by as much as two-thirds from where it is now. Which means that after you get into that post-2028 era, the difference between Mitchell continuing to operate and Mitchell being retired in terms of jobs and in terms of economic impact frankly isn’t that great because it will be operating at such a reduced level.
Meanwhile, we have the option of looking at, frankly, a less-expensive-for-ratepayer option as represented by a Centralia-type of plan that not only would produce more jobs, but also would produce new jobs on an ongoing basis, and many more of them, than what we’re seeing with the continuation of the Mitchell Plant. And those are the numbers that I hope that legislators and other policymakers will look at because, in fact, the economic outcome of retiring Mitchell in 2028 would be better for the local economy and better for the state of West Virginia than having it continue in its current crippled state or one that, frankly, is much reduced from where it is now.
Hirsh: One thing I want to add to what Sean has said is that one of the decisions that the Coal Transition Board made somewhat early in our deliberations was to set aside $9 million directly for workers at the plant. So, $1 million of that $9 million was for education training: Whatever application they chose, they could submit their requests to the Coal Transition Board. And we included spouses, family members, significant others living in the household who would be eligible for that $1 million in support. And then the other $8 million was direct payment when the plant closes, so those workers have a cushion to take them [through] the next chunk of time to make transitions, to stay on their feet, to facilitate their transition to another job or into retirement, or whatever it is they would need. So that was a really important part of this transition. There’s the community investment and the jobs, the infrastructure we’re investing in with the other portion of the money, but then there’s investing in the people that are at the plant and helping them through this transition.
The one other clarification I want to make is that the TransAlta plant is an independent power producer. So, it’s a little different than a regulated utility, and that’s one reason that we needed the legislation to come through the state, because it’s not a regulated entity by the state utility regulators. But I think the economic landscape that both Emmett and Sean have laid out remains true, whether it’s an independent power producer or a regulated utility. There are cost savings relevant in the early closure.
O’Leary: There is one other feature of what Nancy and the folks on the board in Centralia are doing that should be pointed out. And that is, it actually provides the reason why their grant program is so effective. The vast majority of funds that are being allocated by the grants, as Nancy just indicated, are going into education: not just [for] workers, but also education for the community generally. But the other key area in which much of the funding is being allocated is in the area of energy efficiency and new clean energy resources. And the reason that those allocations are so powerful from an economic standpoint is when folks hear the word energy efficiency, their eyes kind of glaze over, and sometimes people don’t even know what you’re talking about. What it means is going into homes and buildings and doing upgraded heating, ventilating, and air conditioning, new lighting, new doors and windows, new insulation.
These are the kinds of things that are done by local suppliers. Even in relatively small communities, we have HVAC contractors and electrical contractors and door and window people. And that means that the money from the funds is being spent with local companies, which then in turn hire local workers. It’s also the kind of spending that causes homeowners and business owners and others to kick in some of their funds too. So, while the grant funding may pay for some of the heating, ventilating, and air conditioning systems, the local homeowner or the business owner will kick in money to pay for more, and that compounds the effect. That compounding or multiplier that’s going on is really what is driving this process, because so much of the money stays local. And I think the last important element of it is that this kind of funding and energy efficiency and clean energy activities have annuity benefits.
Beyond merely creating jobs in the short term, they produce long-term savings in utility bills for residents. They produce an improved quality of life, and those things go on for years and decades. And that means increased disposable income. Probably in the case of Centralia, on the order of $7 million or $8 million a year are going into the economy indefinitely, just because of the energy efficiency upgrades that are going on there. That means that the economic gains that are being realized are not just temporary for as long as the funding is going out, but they will continue long after the funding and long after the transition board has completed its work.
Chyung: Yeah. And follow-up question for Nancy: When you were engaging the organized labor community, I can imagine it was so difficult to talk about the transition, and they don’t like that word, understandably. I mean, you’re talking about their livelihoods. Sean laid out the excellent case about how this is a secular decline in a lot of ways. This is about how we plan for an inevitability in the future, not just a political talking point. So, how did you engage the organized labor community?
Hirsh: It was a challenging series of conversations, and I think that the biggest factor for labor was just time. Time to get their head around what was happening, time to sort out their options, time for workers to plan, and certainly the resources to make the transition a little easier were highly valued as well. So those were some of the key factors. I can’t say everyone at the plant is happy about the transition that’s happening, but there’s recognition that climate change is real, and we have to phase out and stop using coal. And they get that.
Chyung: Yeah. And same question to you, Emmett, with your efforts in West Virginia. Being such a pivotal state in the U.S. Senate, and with this giant infrastructure package that’s being negotiated—without opining on all that political side—what kinds of methods have you used to engage on this message of transition? And have you talked to labor organizations as well, who are sometimes on the opposite side of the green groups?
Pepper: You know, I think we have been. That’s a conversation that is growing and it’s something that frankly, well, we’ve been trying to have that conversation for some time. And it’s something that I think in the past has been something that just was, you know, would shut down conversations, or a third rail, or whatever analogy you want to use. But that has been changing. Actually, the state Legislature put together a task force—I think that’s what they termed it—of legislators to look at transition issues and economic development issues, diversification issues. You know, there’s resolution. There’s been some work around that at the state Legislature and a lot more conversations. I’ve just been noticing the shift in the rhetoric.
But Cecil Roberts, the head of the United Mine Workers of America, is even saying, “Look, we need to be helping train our workers. This seems to be happening. So let’s go put a plan in place here.” He seems to be much more forward-thinking than most of the politicians here, unfortunately, at the state level. But I think there is a lot of interest—again, not getting too far into national politics, which I really hate because it’s hard to keep up, and usually the information is out of date the next day—but I think there has been interest from Sen. [Joe] Manchin (D-WV) and others.
O’Leary: I would like to build on something that Emmett said, and Chris, going back to your original question. When I talk about Centralia, one of the concerns that I hear back often is yes, jobs are growing, they’re better. Are they good jobs? Because when you talk about, whether it’s coal-fired power plants or coal mines, you’re frequently talking about the best blue-collar jobs in the economy, the highest-paying jobs that exist in those economies. And going to a point that Nancy made, it’s certainly the case, I’m sure, for many of the workers in Centralia’s coal mine and now in its power plant that is retiring—yes, probably many of them didn’t find jobs that paid as well as those that are being lost.
On the other hand, we’re not talking about adding jobs that are at the low end of the scale. Two things stand out about the Centralia example that should be encouraging, I think, for all people and especially those in organized labor. And that is that the area in which we see the greatest growth in jobs are not in fast food and in accommodations; they’re in construction, they’re in transportation, they’re in good-paying areas. And that’s why during this time, when Centralia has been adding jobs at twice the rate of the nation, the average weekly wage in Centralia has also gone up 50 percent faster than wages in the nation as a whole. And so, this isn’t a case where we’re trading more jobs for lower pay. We’re actually seeing in Centralia both new jobs and greater pay across the entire economy.
Now that doesn’t mean, going to Nancy’s point, that there aren’t people who haven’t seen their wages go down because they’ve had to go from a very high-paying job to a less-well-paying job. Certainly, there are winners and losers any time there’s change and there’s transition. But I think what Nancy and the folks in Centralia have succeeded in doing is help through the kinds of education and transition benefits she talked about, help smooth that landing for a lot of families by helping not just the workers but also their spouses and sons and daughters who collectively, as family units, are making this thing work. And as a result, the community as a whole is actually doing better. Incomes are rising, not going down, at the same time more jobs are being added.
Chyung: Thank you so much. And I know I promised to let you go before 1:30, but if we could just wrap up with one last question. Sean, just going back to Ohio River Valley’s twin report on the failed promises from the natural gas industry in terms of job creation: In terms of economic growth, while the capital investment might have been there, the labor gains weren’t seen in a lot of these communities according to your report. If you could just touch on that as well, and kind of explain to folks what that was all about?
O’Leary: Yeah, sure. Going back 10 years ago, 15 years ago now, the great hope for an economic gamechanger in a pretty long-suffering region of Appalachia was the natural gas boom. And you know, in the last decade, Appalachia has gone from being a bit player in producing natural gas to generating more than 40 percent of all the natural gas produced in the United States. And that was expected to be, as I said, the proverbial economic gamechanger that would create hundreds of thousands of jobs. Literally it was expected that close to 500,000 jobs would be created in the region.
In fact, when you go back and you look at the numbers over the last 10 years, the number of jobs created or additional jobs created was less than 10,000. Very few. And in most of the counties that are the primary producers of natural gas, the number of jobs has actually declined. And the reasons for that failure—even though immense amounts of natural gas have been produced—the reason relatively few jobs have been created, and in many cases none at all, is because very little of the money that was invested to produce natural gas or that is earned from the sale of natural gas actually lands in local economies in Appalachia.
So much of the resources to do the production are sourced from out of state and outside of the region. And also to your point, Chris, natural gas and utilities and extraction industries are capital-intensive. They’re not labor-intensive industries. You only get, I mean…when we talk about the Centralia model and we’re talking about energy efficiency and distributed resources, those businesses literally produce about three to four times as many jobs for each million dollars invested as do natural gas and extractive industries. And so, when you add to that the local character of the employment, the fact that the money stays in the economy, you can accomplish immensely more with the relatively small amount of money that we’re talking about in Centralia compared with the billions of dollars that were invested in Appalachia for natural gas but which had almost no net effect on local economic prosperity and jobs.
Chyung: That’s fascinating, and I have so many more follow-up questions, but unfortunately that’s all the time we have. Thank you, Sean, Emmett, and Nancy so much for your time today. We look forward to hearing more about your progress in both Washington and Appalachia and building a pro-climate, pro-justice, and pro-labor future for us all. Thank you all so much for joining today.
Hirsh: Thanks, Chris.
O’Leary: Thank you, Chris.