As policymakers debate regulating Marcellus Shale gas drilling, the state needs to protect itself from the booms and busts of energy development that have left many counties with undiversified economies, a less educated workforce and poorer health outcomes. This is according to a new report by the West Virginia Center on Budget and Policy, “Booms and Busts: The Impact of West Virginia’s Energy Economy”, that looks at the impacts of the cyclical nature of the energy sector on the state’s economy and mining counties.

Natural resource extraction tends to lead to economic boom and bust cycles, as production grows and shrinks, energy prices rise and fall, and the resources themselves are depleted over time.

West Virginia has experienced this pattern over the past century. Since the state is so dependent upon natural resources, this pattern of booms and busts causes volatility in revenue streams, leaving communities vulnerable, underdeveloped, and less economically secure.

“Our research shows that the counties with heavy concentrations of coal mining and gas drilling employment underperform economically in the long-run,” said Sean O’Leary, co-author of the report and policy analyst with the West Virginia Center on Budget and Policy. “These counties also tend to be economically distressed, with higher rates of poverty and poorer health outcomes and quality of life.”

The report also finds that the absence of an educated workforce hurts future competitiveness, creating a lack of entrepreneurship and productivity, and the high levels of income inequality create an unstable foundation for economic growth. While West Virginia’s economy will remain highly dependent on natural resource extraction for jobs and income in the near future, the state needs to take concrete action to ensure that it does not negatively impact communities and the state’s economic health.

“The state can benefit from the current energy boom by creating a permanent energy trust fund like the ones in Wyoming, Alaska, and New Mexico. A trust fund will ensure that the economic benefits of today’s coal and gas production are with us well into the future and that the income from the fund can help us build long-term economic growth,” said Ted Boettner, co-author of the report and executive director of the West Virginia Center on Budget and Policy.

“Such a fund can be used for economic diversification, such as investments in early child care and higher education, infrastructure projects like high-speed broadband, renewable energy and remediation, and grants to help entrepreneurs and other business owners,” said Boettner.

The West Virginia Center on Budget and Policy’s full report is available at the link at left.