ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, May 19, 1996 TAG: 9605170018
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
Looking northeast from Wallens Ridge, high above the Wise County town of Big Stone Gap, the lush, horseshoe-shaped Powell Valley lies ahead.
Spared the coal that underlies most of Wise County, Powell Valley also was spared the scars of mining. The picture-postcard view from the ridge is one of scattered small farms and modern, upscale homes embraced by steep, forested mountain slopes and rock outcrops.
Some of the state's most hardened criminals soon will enjoy that view. A maximum-security state prison is being built atop the iron-bearing sandstone of Wallens Ridge.
The prison is one of four - three state and one federal - planned or under construction in two of Virginia's coalfield counties, Wise and Lee. Seen as part of the answer to the region's quest for economic variety, the prisons together will employ around 2,000 people.
The decline of Virginia's coal industry in recent years has made the need for jobs outside mining even more urgent. Prisons, which have been rejected elsewhere in the state, have been welcomed, if sometimes grudgingly, in the coalfields.
Government and business leaders in the region have rallied around efforts to diversify the local economy in the past five to 10 years with a determination unknown before.
A key player in the effort is the Virginia Coalfield Economic Development Authority, which was founded in 1988 during the term of Gov. Gerald Baliles. The former governor, now a lawyer in Richmond, is chairman of the authority's advisory board, which also includes two Roanoke residents: Warner Dalhouse, retiring chairman of First Union National Bank of Virginia, and William Bales, a Norfolk Southern Corp. senior vice president.
The authority, which is funded through a portion of the state's 2 percent gross receipts tax on coal and natural gas producers, helps market the coal counties to industrial prospects. The tax also provides financial support for the purchase of industrial sites, construction of shell buildings that are nearly ready for companies to occupy and installation of utilities.
It has targeted three types of industry - auto parts, forest products and telecommunications - and has had succeeded in wooing new companies in each category to the region.
In fact, as the state's coal producing region - the counties of Wise, Lee, Scott, Dickenson, Buchanan, Tazewell and Russell and the city of Norton - lost 4,542 coal mining jobs between mid-1988 and mid-1995, it gained 9,629 jobs in other major industries, including 2,290 in manufacturing for a net gain of 5,087.
Among the more recent new businesses are Issues & Answers, a market research business that brought 150 jobs to Buchanan County last fall with plans for another facility in Lebanon. Also, Norfolk Southern Corp.'s Pocahontas Land Co., which, in partnership with International Industries of Gilbert, W.Va., will build a hardwood lumber and railroad crosstie manufacturing plant in Scott County that will employ 85 people and provide jobs for another 200 loggers and truck drivers after it opens next spring.
"For sure, this whole region is in a transition mode ... from a natural resource-based economy to a more diversified economy," said Charles Yates, the development authority's executive director.
Last year, Southwest Virginia mines produced 37.6 million tons of coal, down from a historic high of 46.5 million tons in 1990. But more significant is that the number of employed coal miners fell to 6,975 from 10,265 in the same time period. That's the fewest number of miners working in Virginia since 1910. Throughout most of the coal counties this year, unemployment continued its long-term courtship with double digits, ranging as high as 20.6 percent in Dickenson County in February.
Most agree that what's going on in the Virginia coalfields is not just another low point in the coal industry's traditional boom-and-bust cycle. The state's most easily mined coal is already gone, shipped to export piers at Norfolk or to power plants and steel mills in this country and abroad. And average coal prices that have been on the decline since the mid-1970s have discouraged further mining.
"No one who understands the situation realistically expects significant coal production in Southwest Virginia to go on for a long period of time," said Ron Flanary, executive director of the Lenowisco Planning District Commission in Duffield. "The only argument you have among those who look at [the coal industry's decline] is the rate of decline," he said.
In response to the industry's problems, the Virginia General Assembly offered help this winter in the form of a $188 million income-tax credit designed to boost profits at existing mines and to encourage the opening of new mines.
Studies by Virginia Tech and the University of Virginia showed the tax credit would temporarily halt the coal industry's decline and could create hundreds of new mining jobs and even more jobs in related businesses.
The Pittston Co., in its latest quarterly financial statement, projected that the tax credit will save its Russell County-based coal company $4 million annually between 1999 and 2008, figured on the company's current production. Moreover, the company advised stockholders that it is reevaluating its undeveloped Virginia coal reserves to see if any can be economically developed as a result of the new law.
Seeing their number of workers decline, coal companies have for the first time in recent years begun working to help coalfield communities diversify their economies. That contrasts with the decades before the 1980s, when the industry may have had an interest in keeping competition for the region's workers at bay.
Things like the shutdown of Westmoreland Coal Co. in Wise County have led people to realize that sound coalfield economy can't rely solely on the coal industry, Pittston Coal Co. President Karl Kindig said. Pittston, he said, supports diversification efforts because the company has a lot of employees who live in the region.
"But we can't get so fixed on diversification that we forget about how important the coal industry is," he said. Even if the diversification efforts succeed, he said, nothing can provide the economic activity that a core industry like coal can.
Jay Rife, an independent real-estate appraiser and former Buchanan County Chamber of Commerce president, who sits on the development authority's board of directors, said one reason coal executives haven't been involved in the past is they've never before had a forum outside politics. The development authority provides them a nonpolitical way to advance their ideas, he said.
Rife and others observed that over the past dozen years, the corporate conscience of coal companies has risen. The industry now recognizes, they said, that it owes something to the localities from which it drew wealth for so many years.
The coal industry was a strong supporter of using part of the severance tax on coal and gas that was originally set aside for repairing coal-haul roads to finance the authority's activities, Yates said. Coal executives, he said, have provided leadership - serving on the authority's board - and have helped solve problems mired in local politics.
"The coal industry," he said, "has just been the strongest advocate we've had."
Although the region has been able to add jobs even as coal declined, the loss of coal-mining jobs that pay up to $18 an hour has been a big concern, Yates said. The high unemployment rate, which ranged from 6.6 percent in Scott County to 17.4 percent in Dickenson County in March - compared with 2.4 percent in the Roanoke Valley - also continues to haunt the region; but the job growth in the region gives him hope, he said, particularly in manufacturing and in service industries including health care.
Where few existed a few years back, 16 industrial parks are now scattered about the region. Because of the mountainous terrain, the parks are sometimes small and expensive to develop. The five-acre site and 30,000-square-foot shell building in Buchanan County occupied by the market research firm cost $2.5 million to develop.
Since the authority began its work, it has spent $15.6 million on low-interest loans, mostly as incentives to help new industry locate in the region, and $5.6 million on grants, almost all of which went to develop utilities to serve industry, Yates said. The authority, he said, has helped 12 existing industries expand, creating more than 1,000 jobs. Another 21 companies representing 3,865 projected jobs and $59 million in investment have announced plans to operate in the region. Some projects, though, such as a rubber recycling business and a children's furniture factory, were failures, he said.
The authority requires industries that receive incentives to pay at least one and a half times the minimum wage, currently $4.25 an hour, but is shooting for better jobs than that, Yates said. Higher skilled and better paying jobs will come, he said, when the region can demonstrate it has an experienced work force.
Last year, the authority spent $100,000 to promote the region to industrial prospects. Norfolk Southern and American Electric Power Co. Inc. - two companies with vested interests in economic growth of the area - helped with that effort, Yates said. "We've tried to build alliances with every organization we think can help us," he said.
In the past, Yates said he has been disappointed with the lack of industrial prospects directed to the region by the Virginia Department of Economic Development. But the state is doing better now and Virginia Secretary of Commerce and Trade Robert Skunda has been a frequent visitor, Yates and others said.
A key factor in the region's success in attracting new industry is an improved transportation network. Only a few sections of the major primary highways through the region remain to be four-laned, and getting trapped for miles on a curvy road behind a loaded coal truck is now virtually a thing of the past.
One major highway project that is yet unbuilt but is central to the future of economic development in Buchanan County, Rife said, is the Coalfields Expressway. The proposed 90-mile road would link the intersection of Interstates 64 and 77 at Beckley, W.Va., with U.S. 23 at Pound in Wise County, passing through Dickenson County and Buchanan County. If the road followed the ridge tops in Buchanan County it would open up hundreds of acres to development, he said.
The perception of the coalfield region as one of labor unrest - based in part on the United Mine Workers strike against Pittston in 1989 - has been the most difficult problem his authority has had to deal with, Yates said. Sometimes the region will be marked off an industrial prospect's list without being given a chance to tell its story, he said.
But Mike Millard, plant manager for Mullican Lumber and Manufacturing Co., a Tennessee company that opened a hardwood flooring plant outside Norton three years ago, said his company wasn't concerned about the region's labor history. His company is happy with its 160 hourly workers, who make an average of around $8 an hour, and is expanding, he said.
The company picked the Wise County site because it already had a sawmill nearby and knew the community's work ethic was good. The region's double-digit unemployment rate assured the company would have a good pool of potential workers to draw from, he said.
Once they locate in the region, employers have nothing but praise for their workers, said Gary Hale, director of job services at the Virginia Employment Commission office in Norton. Companies are pleased with the low turnover rate, low absentee rate and high productivity rate they have at their coalfield plants, he said. "As new industries come in," Hale said, "we keep hearing about production records being set."
Hale, who is concentrating now on getting local workers more schooling and training, predicts the region's unemployment problems will be behind it in a couple of years. The new state prisons will provide guards jobs paying up to $32,000 a year and other types of work and, in the meantime, are increasing opportunities for construction jobs, he said.
The prisons have given the region an "unexpected leg up" and are going to complement the region's efforts at private development, the Lenowisco Planning District's Flanary said. Studies have shown that 40 percent of the employees for the new prisons will be newcomers to the region and that will help stimulate housing development and other growth, he said.
"We're already in the stigma capital of the world," so the idea that so many new prisons would hurt the region's image has never bothered him, Flanary said. Besides, he said, studies have shown that property values have never been diminished by prisons and the issue of prisons has never arisen in talks with industrial prospects.
The positive impact of the prisons has already been felt, as commercial developers have called him looking for market information, Flanary said. "If it will raise the general standard of living, that's the kind of stigma I'll accept," he said.
The decline of the coal industry, has helped reduce local turf fights and has forced people across the region to work together, Flanary said. The Westmoreland closing in Wise County, he said, helped illustrate that employment pays little attention to county lines as it caused jobless rates to rise in surrounding counties where the company's employees lived.
The diversification effort, Flanary said, "is not driven so much by dominant personalities as by a sense we're all in this together."
LENGTH: Long : 229 lines ILLUSTRATION: PHOTO: Greg Edwards. 1. The closing of coal mines and coalby CNBgrading and washing plants, such as this one at Westmoreland Coal
Co.'s Bullitt mine in Appalachia in Wise County, has added a sense
of urgency to economic diversification efforts in Virginia's coal
counties. color. 2. "We're already in the stigma capital of the
world," said Ron Flanary, executive director of the Lenowisco
Planning District Commission in Duffield. "If it will raise the
general standard of living, that's the kind of stigma I'll accept."
3. (headshot) Charles Yates. Graphic: Map. color. Chart. color.