Entrepreneurship | July 10, 2019

Beyond Coal: Seeding Appalachia’s sustainable future with public and private capital

Jean Haggerty
Guest Author

Jean Haggerty

In a two-part series, we explore how local leaders are blending capital and piloting projects to reinvent Appalachia’s coal-impacted communities. 

In April, the US generated more energy from renewable sources than coal for the first time. Two months later, billionaire Michael Bloomberg launched a $500 million effort to close down coal plants. And last week Chubb, the largest commercial insurer in the US, said it will stop insuring coal plants and phase out existing policies by 2022. 

The signals that the world is moving beyond coal are clear. What comes next in communities long-dependent on coal jobs and economic activity is less so. In Appalachia, the multi-state stretch along the Eastern United States, communities, local advocacy groups and place-based investors are building the market for a more economically diverse and sustainable post-coal future.

“To be self-sustaining, Appalachia needs diverse strategies as well as increased investment and sequencing of capital across the funding and financing spectrum,” said Stephanie Randolph of Invest Appalachia, a central Appalachia-focused impact collective that will deploy both philanthropic and private capital to jumpstart new, locally driven economic opportunities when launches later this year. 

Communities within Appalachia’s coal country have been identifying and testing dozens of innovative projects aimed at transforming the region’s environmental liabilities into economic assets amid the decline of the coal industry. A major aim of the projects that have been explored has been to diversify local economies through public, private and local collaboration. 

Project pipeline

For the last three years, local projects have received public funding through the Abandoned Mine Land (AML) Pilot Program, a program designed to get Appalachia’s coal-impacted communities to think collectively about a future without coal. The hope is that these projects can serve as models and project playbooks available if the RECLAIM Act, for Revitalizing the Economy of Coal Communities by Leveraging Local Activities and Investing More Act, passes the U.S. Congress.

The RECLAIM Act would release to coal-impacted states and tribes $1 billion to invest in projects that promote economic and environmental sustainability, rely on community stakeholders’ input and clean up abandoned mine lands. The funds have been accumulating since 1977, when the federal surface mining law created a mechanism for taxing coal companies on coal production to fund the rehabilitation of Appalachia’s thousands of pre-1977 coal-impacted sites that were abandoned and never cleaned up. 

Under the RECLAIM Act, environmental remediation of abandoned mine sites and community outreach are prerequisites for receiving funding. The AML Pilot Program does not include these prerequisites, but development ideas are usually created in the spirit of the RECLAIM Act for future alignment purposes. (AML pilot monies are provided by the US Treasury through congressional appropriation, and AML Pilot Program funding decisions are made at the state level.)

“We want to queue up these [AML pilot] projects to show that there are options, to show that there are other economic development ideas out there,” said Joey James, senior strategist who specializes in sustainable economic development at Downstream Strategies, a West Virginia-based environmental and economic development consulting firm. 

AML Pilot Program-funded projects that are slated to arrive in Appalachia early next year include a facility that cleans polluted acid mine drainage impacted water and reuses AMD-water byproducts to make paint pigment. Another project plans to build a solar-powered aquaponics facility for farming tilapia and lettuce for local consumption. AML Pilot Program grant money was also made available to a solar-powered sustainable data center on a former strip mine. 

Brandon Dennison: Transforming coal country, one social enterprise at a time

Other projects being assessed are aimed at developing economic opportunities in renewable energy, recreation/ecotourism, bee colony revitalization and agroforestry in the region. Throughout the AML Pilot process, professional practitioners and regional advocacy groups like Rural Action, Coalfield Development Corporation and Appalachian Voices have been crucial partners that have helped stimulate public discussion, collaboration and creative problem solving. 

Invest Appalachia 

In Appalachia, the RECLAIM Act is expected to provide an impetus for bringing in more investment. “One billion dollars is not easily dismissed,” said James of Downstream Strategies, who said the AML Pilot Program grants have helped get people in Appalachia thinking about impact investments. 

“The puzzle is too big,” said Invest Appalachia’s Randolph. To address the region’s problems, she says, “we need multiple approaches.” Invest Appalachia, initiated through the Appalachia Funders Network, plans to deploy two pools of complementary capital. The first is a $17 million pool of catalytic philanthropic capital help local businesses and projects become investment ready. The other is the $40 million Invest Appalachia Fund, which will provide loans to local enterprises and intermediaries. 

Invest Appalachia’s aim is to accelerate economic opportunities in coal-impacted communities in a six-state Appalachian region. The fund’s sector coverage will include food and agriculture, clean energy and renewables, creative placemaking and ecotourism, and housing and community health. 

At launch, Invest Appalachia will likely be Appalachia’s first blended pool of capital, but regional philanthropic impact funds, including the Just Transition Fund and the Appalachian Impact Fund, already exist. 

Absorbing risk

Appalachia has suffered through many cycles of “silver bullet-style” approaches to economic development, and this time around, diversifying away from extractive industries is paramount. The declining value of coal is heightening the stakes. “We understand the stakes,” says James. “We have an opportunity in front of us to maximize the benefits.”  

In economically distressed areas, there are a lot of barriers to accessing capital and there are risks that needs to be absorbed, says Donna Gambrell, the CEO of Appalachian Community Capital, a community development financial institution. 

Risk-taking philanthropic capital can mitigate the risk of young projects. All of the grants issued under the Congressionally-funded Partnerships for Opportunity and Workforce and Economic Revitalization initiative for coal-impacted communities require a matching grant, for example, which is typically fielded with the assistance from private philanthropy, including members of the Appalachia Funders Network. 

Says Lora Smith of the Appalachian Impact Fund, a philanthropic impact fund, even AML pilot projects sometimes require the type of additional flexible capital that a philanthropic impact fund can provide—just to keep going or to get over the finish line.