RICHMOND, Va. -- The coal industry that dominates southern West Virginia's economy could take a nosedive if the Ohio Valley Environmental Coalition gets its court win past the appeals process, according to an economist and state official. Coal production could then shift to northern West Virginia, they said.

Judge Robert C. Chambers with the U.S. District Court for West Virginia's Southern District effectively halted valley fills in southern West Virginia in March 2007 when he ruled for the plaintiffs -- environmental groups Ohio Valley Environment Coalition, the West Virginia Highlands Conservancy and Coal River Mountain Watch -- in their lawsuit against the U.S. Army Corps of Engineers.

The environmental groups said the corps failed to produce detailed environmental impact statements and handed out valley fill permits in violation of the Clean Water Act and the Environmental Policy Act.

Valley fills are created when rock and rubble covering coal seams is removed and dumped in nearby ravines. Environmental groups say the practice chokes streams and pollutes water and want the corps to conduct more detailed studies on the fills' effects.

The case was heard on appeal Sept. 23 in the 4th Circuit Court of Appeals in Richmond, Va. After a decision is made in federal appeals court, the only judicial step left is the U.S. Supreme Court.

"It is basically the same case, the same arguments over and over again. It's basically been kind of a ping-pong match. Somewhere along the line we're going to have to have a definitive decision," said Cal Kent, vice president of Business and Economic Research at Marshall University. "And the problem with litigating it like this, it creates a lot of uncertainty. And that uncertainty means people aren't going to be making major investments."

The four affected mines are permitted to produce about 40 million tons of coal -- roughly one-quarter to one-third of the state's total production. The mines employ 600 people in jobs that are projected to last up to 15 years and pay average salaries of $65,000.

If OVEC wins after all appeals are exhausted, lower coal production and lower revenues could shift mining from southern to northern West Virginia, said Kimberly Osborne, director of communications for the West Virginia Department of Revenue.

However, for the calendar year to date, Osborne said, severance tax collections are up 36 percent for the energy sector statewide, including coal and natural gas.

Severance taxes are booming, but those increasing profits are tied to existing permits, Kent said.

He said surface mines are permitted in stages, and so as companies run out of existing permits, there will be a much greater effect on revenue.

The coal severance tax rate is 5 percent of coal's sales price. So as coal prices go up, the state gets a bigger cut, said Jason Bostic, vice president for the West Virginia Coal Association.

Vital social services that are supported through severance taxes, or by severance tax recipients, also see more revenue coming in when coal is doing well.

As less coal is produced fewer severance taxes are collected. It should be recognized that a huge percent of personal property portion of severance taxes come from mining equipment and large trucks used in surface mining, Kent said.

The impact of less tax money coming in will be felt statewide, and will affect everything from school to municipal to county revenues, he said.

"The property portion of the severance tax is distributed, even to counties that are not coal producing. It has been a real nice cushion for some of us.

"I'm not arguing the merits of the case, but I don't think anyone thinks the end of mountaintop removal would be beneficial for the state and for the poorest portions of the state. It's got to be recognized that no matter the pro side there's a huge con side as well to stopping this process," he said.

Bostic said the issuance of 404 permits is "down 70 to 80, I'd go as far as 90 percent, from pre-lawsuit levels." Section 404 of the Clean Water Act gives the corps authority to issue valley fill permits.

Some mining can go on without receiving valley fill permits, but particularly in a new mining operation, 99 percent of the time it requires stream disturbance, he said.

He said the industry isn't growing, and that coal mines "haven't been getting permits to sustain production, let alone bring on new production."

Kent said some underground mines continue to operate because the surface mines above them make the operation profitable.

"In many instances, mountaintop removal projects are tied in with shaft mines, particularly in the south," he said. "The fact is that if you lose the mountaintop removal production it can very definitely affect ... the deep mine production, and then a lot of the deep mine or shaft production becomes less economical to produce."

Osborne also said the mining shift would lead to the desulfurization of coal.

Southern West Virginia coal has been used as a blending agent, Kent said, because it's low in sulfur. Northern West Virginia coal has a higher sulfur content, so the two have been blended together. The advantage of low sulfur coal has diminished with scrubbers, he said, so the premium for southern West Virginia's coal has collapsed -- the difference between the two is not as wide as it has been in the past.

That combined with the slowdown in valley fill permits, he said, "would be what would be pushing the mining to the northern part of the state," he said.

Vernon Haltom, co-director of the Coal River Mountain Watch, said coal accounts for seven percent of gross state product and employs only five percent of the work force. He estimated that about 2 percent of those workers are at mountaintop removal sites.

An end to valley fills and mountaintop removal "won't ruin the state economy and won't put everyone out of work, and will probably promote underground mining in the meantime," he said.

Bostic said the plaintiffs assume coal companies can offset losses, which he said "could essentially set the bar too high for us." The decision could in turn, he said, trickle down to road construction, airports, schools and housing developments, since coal mines aren't the only land disturbing activity that require 404 permits.

"With a three-month dead period here, and a four-month dead period there, 404 permitting in West Virginia has slowed to a trickle," he said.

The lack of 404 permits is one reason why coal prices in Appalachia have increased, Bostic said, in addition to higher prices and an upswing worldwide in the energy section.