The Energy Answer is Under Our Feet

Of all the states, West Virginia’s economy ranks at the bottom while we sit on mountains filled with energy in the middle of an energy crunch. Our economy should be booming, yet it is not. One reason is that we have a tendency to look to government for solutions and not to ourselves. Ronald Reagan once said, “Government is not the solution to our problem. Government is the problem.” His words hold true today. Everyday as we fuel up our vehicles paying close to $4 or more per gallon we are reminded government has not solved the problem, nor will it.

Government officials hold meetings and conferences, form committees and coalitions, but then all that happens is they talk about the problem and get their pictures in the media. One conference referred to the “New Technology of Coal Liquefaction.” For the record Friedrich Bergius developed one of the first processes for turning coal into gasoline almost 100 years ago.

Government doesn’t even know how old the processes are; are we sure we want it in charge?
One of the ideas being floated is a Private-Public Partnership, where government becomes a partner in the construction and operation of a coal liquefaction plant. The problem is government becomes the dominating partner in these ventures; the project becomes bloated, inefficient, and politically influenced to the detriment of the private business partner, the taxpayer and the consumer. History also reveals that the term “corporatism” was coined by Benito Mussolini to describe Private-Public Partnerships, which were used as a way to maintain government control. This is not a road we want to go down.

So what should be government’s role? Government’s first and most important goal should be to make as level and competitive playing field as possible. We must give West Virginia’s businesses a competitive advantage through business friendly tax and legal reforms. Half measures like eliminating the franchise tax by 2015 is not going to give us a competitive advantage anytime soon. It is like getting in a swimming pool one toe at a time instead of jumping in all at one time, getting wet and starting to swim. We must enact the needed tax and legal reforms wholly and fully now — get the initial shock out of the way and then begin to swim in increased jobs and tax revenue as our economy expands because West Virginia will be economically competitive.

So if government’s job should be to provide a level playing field for the competitors, then how do we move forward? The free market will always seek the lowest price and if fuel made from coal is cheaper, then the market will purchase fuel made from coal instead of oil. While we know we can currently make fuel cheaper from coal than oil, the problem is in regard to the cost and time of building the coal liquefaction plant. That cost is estimated at around $2 billion with about 2 years of construction. Some company has to be willing to risk the investment in the plant and take the chance that oil prices will remain high long enough for the plant to pay them back with interest.

Sometimes the only nudge the free market needs is the spark of an idea. Consider that CSX Corporation in 2006 purchased $1.2 billion dollars worth of fuel and you know from your own visits to the pump its 2008 numbers are substantially higher. What if the West Virginia coal Industry sits down with CSX Corp and says, since CSX already services 130 active coal mines and purchases billions of dollars worth of fuel, together we can build a profitable coal liquefaction plant. The plant could provide CSX with lower cost fuel, provide West Virginia coal producers with a new market outlet, provide high paying jobs across the board, give the state increased tax revenues and pump billions of dollars into the West Virginia economy.

As a state loaded with natural resources we have an opportunity, but only if we are willing to make the necessary political changes to make it happen. If we are not held back by Charleston’s bad economic policies, then West Virginia has an answer to the nation’s energy challenges. That answer is under our feet.