BOOM OR BUST IN THE HOLLOWS OF APPALACHIA
Published: October 18, 1981, New York Times

John Egerton is a journalist and author living in Nashville and is currently at work on ''Generations,'' a book about a Kentucky family. By John Egerton When President Lyndon B. Johnson flew into the mountains of Appalachia in the spring of 1964 to declare war on poverty in the United States, one of his stops was Martin County, Ky., where the typical citizen was said to be an unemployed white Republican. Martin County then vied with a handful of jurisdictions scattered across the country for the dubious distinction of being the poorest county in the richest nation on earth.

Since then, 17 years of public programs in the Democratic tradition of Government-induced economic and social change have kept places like Martin County from total collapse but have not transformed them into self-supporting communities. Now the activist philosophy of government initiated by Franklin D. Roosevelt and continued with varying degrees of enthusiasm by four Democratic and three Republican Presidents has been given a 180-degree turn by Ronald Reagan, whose expressed determination is to return the nation's economic destiny to the forces of private enterprise.

And Martin County, just as it was once a symbol of the Government's plan to eradicate poverty, is now something of a demonstration model of ''Reaganomics,'' a small-scale example of ''supply-side economics'' in action.

The unfamiliar terminology of the newly ascendant economists and public philosophers still puzzles many people, but there are a few Martin Countians who seem to understand it quite well. Echoing President Reagan, they argue that too much Federal funding of social programs and too much regulation of such industrial enterprises as coal mining have stifled private initiative and kept inflation high. What is called for, they assert, are reductions in taxes and in government regulation and spending, accompanied by increases in employment, productivity, investment capital, wages and personal savings in the private sector.

There could hardly be a more interesting place to watch the shift of power and philosophy than Martin County, where public and private promises have come and gone but old-fashioned, rock-ribbed Republicanism has endured.

Eighty-six-year-old Rufus Mitchell Reed remembers the early years of this century when the rugged old-timers of his native Martin County prayed for an acre of river-bottom land and then, their prayers unanswered, coaxed corn and potatoes from tiny patches of thin soil on the steep and rocky hillsides. The hardy ones who persisted and survived, he says admiringly, were ''conquerors of the dark hills.''

Until the 1960's, outside influences rarely penetrated the mountain wall behind which Martin County's sparse and scattered population struggled to maintain itself. But then came the ''war on poverty'' and after it a coal boom that sent the county's average industrial wage skyrocketing from the bottom to the top of Kentucky's income rankings. Rufus Reed has watched these deeply significant developments with deeply mixed feelings.

He remembers the day when President Johnson was driven to a threeroom shack on Rockcastle Creek, where a family of 10 lived on meager rations of food and hope. The unemployed head of that household was photographed on his front porch, and the mountaineer's haggard face on television screens and in newspapers and magazines became a symbol of the poverty his Government had sworn to erase.

Mr. Reed doesn't doubt that the Government meant well, but in his opinion the war on poverty ''didn't amount to a hill of beans, because the really poor people are no better off than they used to be." Many Martin Countians still live in the same frail shacks President Johnson deplored, and are still unable to support themselves.

The other major development in Martin County - the coal boom - fills Rufus Reed with ambivalence. Watching the mining companies transform hugh tracts of forested slopes into treeless plains, he wonders whether the short-term wealth they are creating will eventually give way to long-term conditions even worse than those faced by the Martin County settlers of old. "When the coal is gone, when the topsoil is washed away and the streams are clogged with silt, what will the people do then?" he asks. "The companies claim there will be plenty of flat land for farms and houses and industries. It sounds good, and I hope it's true, but I can't see it myself. When they get done conquering the dark hills this time, I'm afraid there won't be anything left."

Charles Osborne, a retired cabinetmaker, lives in the same Martin County hollow where he was born more than 60 years ago. Mr. Osborne had never given a thought to selling his place - until two years ago, when a boulder blasted from a nearby strip mine crashed throught the porch roof, narrowly missing his wife and knocking out their electricity for four months. Later, a ruptured holding pond at the mine washed out their road. Mr. Osborne says he's "not getting much satisfaction" from the coal company, even though he has taken it to court. "We don't want to move," he says, "but we may be forced to. They keep coming closer and closer."

Monroe Cassidy, a self-described "old man" at 40, dropped out of school after the ninth grade and left his Martin County home for Michigan at the age of 21 when he couldn't find enough work to support his young family. Nine years later, he gave up a $12-an-hour job as a steelworker and went home to earn less than one-fourth that much with a mining company. But the new coal boom has since upped his wages and benefits above $35,000 a year, and he plans to stay as long as the coal lasts."It won't be as pretty when the coal is gone, and Martin County will be poor again," he says. "But there wasn't nothing here before they started mining, and there won't be nohing left after they leave."

Since her husband was killed in a mining accident eight years ago, 49 year-old Avenill Mollett, mother of 15 - one of her sons is permanently disabled as a result of a mining accident - has gotten by on a Social Security check, food stamps and a small amount of monthly compensation from her late husband's employer. Mrs. Mollett, who has lived all of her 49 years in Martin County, has seen hopes raised and dashed more times than she can count. "If they cut back on the Government programs, that's going to hurt," she says. "They never did do much for me, though. Neither did coal. I'd like to move away, but I can't. I'm stuck here."

These are voices from a community in transition, a place suspended between an unsatisfactory past and an uncertain future. In order to grasp the impact of government and industry on Martin County over the past two decades, it is helpful to understand the way things used to be. From the time the area was first visited by pioneers in the late 18th century to well beyond its formation as a county in 1870, it was a remote region of dense forests, jagged mountain peaks and knifeblade-thin hollows where little changed except the seasons. Subsistence farming, lumbering and a little bit of mineral extraction were the principal occupations, but all three were limited by the ruggedness of the terrain and the lack of transportation. Martin County was a small and insignificant district of 231 square miles and a few thousand people on the eastern edge of the state, just across the Tug River from Virginia. The first paved road was extended east and west across the county in the 1920's, but inspite of intermittent period of activity in the coal mines, the pattern of stagnation continued for almost a half-century longer.

When Presidents Kennedy and Johnson prodded the nation to an awareness of Appalachian poverty in the 1960's, Martin County was near its lowest ebb. Its great store of natural resources - low-sulfur coal, natural gas, crude oil and timber - was thought to be all but inaccessible to large-scale recovery., and there was no other industry in the county. Most of the jobs and all of the political power, such as it was, could be found in just three places: the county school board and system, the one county back and the Republican-controlled county courthouse. Neither the county seat of Inez, a drab hamlet of a few hundred people, nor its colorfully named but equally plain sister villages - Beauty, Lovely, Warfield, in decline for 30 years, was approaching a low of 9,000, and for a substantial proportion of families, the principal source of income was what little they received in Government assistance checks. Coal production had fallen to approximately 35,000 tons a year - barely enough to keep 50 miners working. Only a small minority of Martin County families had an annual income of as much as $5,000, and fewer than two of every 10 adults had finished high school.

The campaign to end poverty brought Appalachian volunteers, VISTA workers, the Appalachian Regional Commission; it brought housing, health care, transportation, legal services, aid to education; it brought highways, water and sewer projects, economic-development programs; it food stamps, income supplements, nutrition assistance, day-care centers, occupational-safety programs and compensation for black-lung disease. Although not all of these directly benefited Martin County, Federal expenditures in the couty since 1964 have totaled well over $100 million.

But by the time the money filtered through political bureacracies in Washington, the state capital of Frankfort and Inez, the county seat, a great deal less was left for the intended recipients. Graft and corruption made a mockery of some well-intended programs. Martin County's leading public official, County Judge Willie Kirk, was tried and convicted of embezzling Federal flood-relief funds. (Sentenced to 20 years in prison, he served only five months before being granted a full pardon by then-President Richard Nixon. He subsequently won the top county office again, and still holds it.)

For the poorest of the poor, not much changed. Even the most determined among them were hard pressed to escape the smothering embrace of government on one side and the tight-fisted control of the local ruling clique on the other.

But in the minds of many people, there was always a glimmer of hope that ways could be found to tap the mineral wealth that lay all about them. Finally, in the early 1970's, the Norfolk and Western Railway turned that hope into reality. At a cost of nearly million a mile, the N.& W. built a 24-mile branch line from its main route in West Virginia to the heart of the Martin County coal fields, and the boom that began with the coming of the trains has continued with hardly a pause ever since.

In 1973, when the rail line was in full service, the OPEC oil embargo escalated coal prices to unheard-of levels -$65 a ton and more - and, with what seemed like perfect timing, the N.& W. was ready to begin harvesting an almost inexhaustible reserve of black gold from its nearly 129,000 acres of surface and mineral rights, which constitute more than half of the county's surface area. The holdings, which give N.& W. title to a major portion of the estimated 1.4 billion tons of coal reserves in Martin County, were leased to four of the nation's largest energy corporations - Occidental Petroleum, St. Joe Minerals (recently bought by Fluor Corporation of Los Angeles), Ashland Oil and MAPCO Inc. - and the railroad got their freight business and a royalty on each ton of coal they mined. Though prices have since moderated to about $32 a ton, both the mineral-extraction firms and N.& W. have enjoyed steady and substantial profits. In 1980, the official yield of coal from Martin County was 13.4 million tons. That total works out to more coal mined per day than had been mined per year two decades ago.

Before-and-after statistics show the dramatic consequences of the Martin County coal boom: Unemployment has plummeted from almost 40 percent in the early 1960's to less than 4 percent now; per capita annual income has risen from $1,000 to $7,000 in 20 years, and coal miners' earnings typically exceed $30,000 a year. The county population has increased from about 9,400 to 14,000 in the last 10 years, with more than 5,000 people now employed by the coal companies. The Inez Deposit Bank has doubled its assets in the past decade, and the amount of money in its accounts has nearly tripled in just five years.

Robert M. Duncan, chief executive officer of the Inez bank, is one who awaits the outcome of the Reagan Administration's policies with confidence. Noting the impressive economic advances Martin County has already made, Mr. Duncan gives full credit to private enterprise. ''It wasn't L.B.J. who made those things happen,'' he says. ''It was the railroad and the coal companies.''

But for all its recent growth and relative prosperity, Martin County is still a long way from economic and social health. Most of the corporate wealth generated there leaves the community. The local tax base traditionally has been too low to support even the most modest public needs, and with the rapid rise in population it has become totally inadequate. Coal extraction, particularly by strip mining, has seriously damaged the already poor county road system and contributed to such environmental problems as water pollution, flooding and erosion.

And even Robert Duncan, the banker, in spite of his support of President Reagan's economic policies, stops short of saying that Martin County's public programs and services or its continuing social and environmental problems can, or should, become the responsibility of the private sector.

''We can't make it on our own,'' he says. ''A strong economy will have its trickle-down effects, but government will still have a major role to play.''

Mr. Duncan's ambition is to have all the parties with an interest in Martin County's future work together on a long-range plan to assure its survival and improvement. The corporations, he says, should lead the way. ''If we could get the top executives to come in here and see the whole picture, I think they'd realize what's being taken and what's being put back, and they'd be more charitable. ... Public and private leaders working together can assure a bright future for Martin County, and I have faith that it will happen. If it doesn't, this place could become a wasteland.''

Four years ago, after the worst flood on record swept through the Tug River valley, an alliance of people and organizations concerned with Appalachian social and economic issues was formed. The Appalachian Land Ownership Task Force, with support from the Appalachian Regional Commission, spent two years poring over deed books and tax rolls in 80 counties in six states. The resultant voluminous study, the most comprehensive land canvas ever attempted in the region, was published last April. Its documented findings revealed that the single largest private owner of surface and mineral acres is the Norfolk and Western Railway, which through its landcompany subsidiaries holds title to more than 380,000 acres in three states. In Martin County alone, N.& W. now controls 47,869 acres of surface rights and 81,333 acres of mineral rights, yet its 1978 county property-tax bill was, in the words of the land-ownership study, ''hardly enough to buy a bus for the county school system.''

(Harvard University was identified in the study as the secondlargest mineral owner in Martin County, with 9,720 acres of oil and gas rights, a gift from the descendants of Louis Agassiz, the famous Swiss-born Harvard scientist of the 19th century, and his wife, Elizabeth Cabot Cary Agassiz, the first president of Radcliffe College. The university has never sought to develop the property, but it does receive several thousand dollars a year from one leased well. It does not, however, pay any property tax to the county.)

The N.& W. acquired almost all of its Martin County holdings in the 1940's and 1950's, paying slightly more than $2.6 million for 98,600 acres of surface and mineral rights. The company's combined state and local property taxes since its first purchase have totaled less than $400,000. Thus, for an investment of about $3 million in property and taxes and about $22 million more in its railroad spur to the coal fields, the N.& W. controls a bed of coal that in 1980 alone returned to the company nearly $20 million in tonnage royalties and millions more in freight charges. The railroad, which has a coal supply that could last for another half-century, apparently comes close to recovering its total investment each year.

Although recent property transactions in Martin County's coal fields have shown land to be selling for an average of $2,000 an acre, a 1980 move by the local tax assessor to raise the appraisal on N.& W. land holdings from $50 to $200 an acre is tied up in Kentucky's board of tax appeals. The reappraisal would increase the company's state and local property-tax bill to about $67,000 from the 1979 total of $25,455. Under the terms of N.& W.'s lease agreements with the coal companies, property taxes are routinely passed on to them.

Meanwhile, the Martin County school system, one of the poorest in the state, manages to raise only 7.5 percent of its $4 million annual budget from local taxes. The rest comes from the state and the Federal Government, both of which are reducing their appropriations to local schools. ''At the very best,'' says Dan Branham, the county school superintenent, ''we're facing rising enrollment with a standpat budget.''

The entire range of programs and services in health, education and welfare is being sharply scaled down by both the Federal Government and the state, and there is no indication that either the local government or the major corporations will take up the slack. In some programs, the effect of budget cuts has been immediate and severe: case-load reductions of 15 percent to 20 percent in food stamps, Medicaid and aid to families with dependent children, and a drop of more than two-thirds in the number of CETA (Comprehensive Employment and Training Act) workers.

Kentucky's Democratic Governor, John Y. Brown, who made millions as a promoter of Kentucky Fried Chicken and now contends that Kentucky is ''the state that's run like a business,'' says he is eager to take on responsibility under the ''new federalism'' policies of President Reagan for overseeing the allocation of Federal development block grants for cities and counties with populations under 50,000. It remains to be seen, however, whether this shift will eliminate bureaucratic practices that have damaged many Federal programs.

For all the wealth it now generates with its mother lode of highquality coal, Martin County still lacks basic amenities that most Americans take for granted. It has no sewer system, no garbage collection, no four-lane roads, no hospital, no movie theater. The sheriff and three paid deputies and two patrolmen make up what local law enforcement there is, and the fire department consists of two volunteer companies. Only about 700 of the county's 4,400 housing units are classified as ''sound,'' and only about 20 percent of them have septic tanks; the rest dump raw sewage directly into the streams. There is one small county park, one weekly newspaper, one radio station and one fast-food franchise (Kentucky Fried Chicken).

Extractive industries have owned the wealth and systematically carted it away for so long that it almost seems by some natural right to belong elsewhere. Only the poverty belongs in the mountains.

In light of this common public perception, one more statistic deserves mention. In 1980, government agencies at the local, state and Federal levels spent close to $20 million in Martin County. That same year, individuals and corporations in the county paid taxes and fees totaling approximately $40 million.

''Private enterprise is not the only extractive industry at work here,'' says Homer Marcum, publisher of the weekly Martin Countian. ''Contrary to the general belief, government also takes out more than it puts back.''

For good or ill, coal is the one hope of Martin County. Peak production of about 15 million tons a year - two-thirds from surface mines -has almost been reached, and estimates of uninterrupted mining at that pace range from 20 to 50 years. Only the miners at the Island Creek Company, an Occidental Petroleum subsidiary - less than onefourth of the county's mining force - are unionized; the other major companies have kept the union at bay by keeping wages and benefits competitive.

Moderate quantities of gas and oil are also being taken, and some lumbering continues. For the foreseeable future, there will be plenty of steady, high-paying jobs, and Martin County will not soon be able to catch up with the demand for housing or empty lots on level ground.

Level land has always been hard to come by in Appalachia. Now, ironically, Martin County is accumulating thousands of acres of it on the flattened mountain tops where strip mining is taking place. But can the land be made accessible, stable or fertile? Will the watersheds survive? Can mud and dust, flooding and erosion be controlled? Can new communities take root on the high plains? Can old communities withstand the traumas of transition? There are lots of opinions but no reassuring answers. The only realistic response may be something akin to the mixture of resignation and determined hope expressed by Niles Cumbo, manager of the county water system: ''It's too late to yip and yell - it's already started, and we can't turn back. I hate to see the mountains torn up, but the land can be reclaimed. ... It'll take a lot of effort, but it can be done.''

Others are less sanguine. Lorraine Slone, a community activist, has said that, ''when they get through, there won't be anything left but a flat rock a crow wouldn't light on.''

The views of company officials closely involved in the mining of Martin County add to the range of opinions.

''We want to leave it better than it was before,'' says J.C. Smith, resident manager of the Kentucky Pocahontas Corporation, a subsidiary of N.& W. ''Our lands are leased to companies with enough capital to recover coal efficiently. They're required to reclaim the land, and they're doing a great job. As ... reclaimed land is released back to us, you'll see all kinds of developments up there - orchards, farms, livestock ranges. We just donated 150 acres for a new regional airport, and we're open to other ideas. We don't intend to walk off and leave this land to the Indians.''

Throughout his 32 years as Representative and Senator from Tennessee, Albert A. Gore Sr. was an unabashed liberal, an advocate for ''the little man'' and a frequent critic of corporate interests. Now, as chairman of Island Creek Coal Co., an Occidental Petroleum subsidiary that is mining extensively in Martin County, Mr. Gore says, ''I can't predict what it will be like there in 20 years, but I certainly don't see doom. ... Reaganomics won't last long - corporations won't take over the Government's role, and the Government won't desert the people. The pendulum will swing back. There's a rhythm in politics and economics, the same as there is in nature. Getting the Government off the backs of the corporations could make matters worse. Island Creek is doing a good job. ... We're not without imperfections, but we take the law seriously, and we follow it to the letter.''

Robert M. Cornett, who heads the Appalachian Development Center at Morehead State University in eastern Kentucky, believes Martin County will have a strong coal economy for another 40 years, but far less time than that to convince its people that life around the mines is getting better, not worse. ''It's a psychological thing,'' he says. ''If people believe there won't be anything left after the coal is gone, it'll be impossible to build a strong community. We've got about 10 years to convince them there's a good future there - otherwise, there'll be a mass exodus. The way I see it, the future is bright. There will eventually be about 25,000 acres of rolling land up on top of the strip mines - more than enough for a thriving economy. The engineers and the environmentalists assure me it can be done.''

Officials in the Interior Department's Office of Surface Mining (O.S.M.) say the big-four mining companies have done a reasonably good job of reclamation in Martin County. The larger strip-mine operations, they say, generally have better equipment and management than smaller, so-called renegade or wildcat mines. Martin County, therefore, is in better shape than numerous other coal-field counties because of big-firm dominance.

But Secretary of the Interior James Watt has made no secret of his desire to take the Federal Government out of the mine-inspection business. In the new Federal budget that went into effect this month, O.S.M. funds have been slashed - in eastern Kentucky alone, the agency's staff of mine inspectors has been reduced from 38 to no more than 10.

Staff members at O.S.M. are reluctant to speculate on the long-term consequences of large-scale strip mining in the mountains, with or without close inspection. But from a variety of sources in the Federal and state governments, in environmental groups, in mountain communities and even in the coal industry itself, it is possible to find a point of view that contrasts sharply with the one expressed by coal-company spokesmen. A less hopeful view, it can be summarized as follows:

For some forms of agriculture there may be a limited prospect on the tops of restored strip mines, but for communities, industry and other full-scale developments, the forecast is not good. The settling of tons of relocated earth will take years, and until that happens, problems with building foundations, roads, sewers and other utilities will be severe. Even in agriculture, the poor quality of soil will require expensive and continual supplementation. Most serious of all will be the problem of water - the availability of it, the quality, the control. There is no question that strip mining has contributed significantly to stream siltation, erosion and flooding, and serious damage has been done to aquifers, ground water and entire watersheds. If everything the law requires is done, there may be a few scattered sites where enterprises of some dimension can thrive, but, overall, the engineering and environmental problems and the cost of solving them will be too great to make development feasible.

The mountain lawyer Harry M. Caudill, author of ''Night Comes to the Cumberlands'' and now a history professor at the University of Kentucky, often has criticized corporations and government agencies alike for exploiting the human and natural resources of his native Appalachia. This time, he says, their efforts could turn the region into a land of desolation:

''If we had a rain now like the one that caused the 1927 flood, it would devastate the entire region. Those bare flat tops would simply slide away and bury the people in the valleys. It would be like the biblical flood. And even if the rains don't come and the land somehow survives, what good will it be after the coal is gone? With the greatest expense and effort, they can show a little greenery here and there, but the idea of extensive development is just a big pipe dream. Historically, neither the corporations nor the Government has had much to be proud of in Appalachia. They've treated the region as if it were a colony. When they finish taking what they want from it, they'll just let it go to hell.''

Homer Marcum, the newspaper publisher, is more hopeful. ''Maybe our luck is finally changing,'' he says. ''We're getting some new faces in the courthouse and a new source of revenue.'' (In the 1981-82 fiscal year, Martin County and Inez will receive $1.6 million in coalseverance tax funds from the state treasury. Heretofore, the state has kept most, or all, of this tax on coal tonnage, which last year generated $17.7 million in Martin County alone.)

''I can think of only of a few more things we need,'' Marcum continues. ''Tax reform is one. We also need to make sure the Government doesn't desert its responsibility for social programs and strip-mine regulation. We need to get the Government and the corporations to plow back a lot more of the wealth they take from us every year. Finally, we need to have a summit conference of all the decision makers to explore in public the hazards and opportunities facing us in the future. After we've done all that, Martin County might have a chance to make it after all.''