Achieving Federal Program Coordination Through a National Transition Corporation

It is useful to remember that major coal-fired power in the United States is relatively new and was built in a moment of unprecedented coordination. The “Big Buildup” on the Colorado Plateau in the ‘70s and ‘80s—including the development of Navajo and Hopi coal resources—is but one example of the scope of planning and investment that enabled rapid, serious, and coordinated work to transform an U.S. energy system.¹ Today, as those same coal-fired power plants and mines are closing, rural communities with economies tied to coal—such as Apache and Navajo counties on the Colorado Plateau in Northeast Arizona—face the question: What happens after fossil fuel? A retreat from federal policy and regulation since the late ‘70s, including national movements to deregulate electricity markets and an anti-tax movement, has left an uncoordinated and often contradictory planning environment. The lack of a single federal policy framework to guide the process for transition planning places the risks of disruptive plant and mine closures onto workers and local governments.

This report considers the lived experiences of several rural energy communities as they attempt to access resources, technical assistance, and partnerships with federal agencies to achieve their local goals—such as maintaining services and schools, building welcoming communities, and creating opportunity for displaced workers. The report also examines the experience of federal staff working to better coordinate program delivery across multiple federal agencies to meet the needs of energy communities.

Author interviews with local and federal officials reveal that a new commitment to localized federal staff and coordination among federal agencies are welcome and working. But these new partnerships still run up against the limits of a complex and siloed federal assistance system. Local and federal officials report a desire for flexible funding mechanisms to provide holistic support as well as a need to streamline federal processes. Achieving these goals through existing programs will remain elusive; what is needed is a coherent vision and comprehensive set of policies and authorities to enable meaningful engagement and coordination. To that end, the report argues that a National Transition Corporation may be the most comprehensive, flexible method for addressing the scale and complexity of the national transition and rural issue.

A closer look at Apache and Navajo counties

The transition away from coal on the Colorado Plateau, including in Apache and Navajo counties, is emblematic of the challenges facing communities nationally. In 2019, the Kayenta coal mine and the Navajo Generating Station—the largest coal-fired power plant in the West—shuttered their doors.² That closure came on the heels of the Mohave Generating Station shutting down,³ which followed the Black Mesa coal mine ceasing operations in 2005.⁴ Now, Apache and Navajo counties, still reeling from the economic and environmental impacts of prior closures,⁵ will lose four more coal-fired power plants by 2032—the Cholla, Springerville, and Coronado generating stations as well as the Four Corners Power Plant, which is located in northwestern New Mexico and operated by Arizona Public Service on Navajo land.⁶

The scheduled closures are putting Apache and Navajo counties under fiscal duress. Their budgets, like those of many other energy communities across the United States, are overly reliant on coal revenue. The loss of that revenue will affect all aspects of community life, from police and fire services to roads and sewers to schools. For instance, St. Johns Unified School District in Apache County is set to lose nine teachers and two principals from their schools; as Preston Raban, economic development director for Apache County, put it: “That’s 275 combined years of teaching experience walking out the door.”⁷ Besides teaching experience, school employees’ contributions to community groups, local boards, and businesses are also lost. An exodus of workers and their families poses a threat to the very survival of places such as St. Johns. “We’ve been trying feverishly to get in front of this,” said Raban.⁸

Generating stations and mines are primarily sited in remote rural areas, which further exacerbates this disruption.⁹ For instance, the micropolitan statistical area of Show Low, Arizona, designates the entirety of Navajo County as “having a high degree of social and economic integration with the core as measured through commuting ties.”¹⁰ Yet actual commuting distances and lived experiences negate a high degree of integration; for example, the Kayenta coal mine is nearly four hours by car from Show Low. The remoteness of energy communities means there are physical and societal limitations to prosperity, and meaningful policy requires creative, place-based considerations.

Apache County, which covers Arizona’s northeastern edge, has a population of 66,021 and a population density of 5.9 people per square mile, according to the 2020 census.¹¹ St. Johns is the county seat, with a population of slightly more than 3,400 residents.¹² Navajo County is directly to the west. As of the 2020 census, it had a population of 106,714, with a population density of 10.7 people per square mile.¹³ Holbrook is the county seat, with a population of slightly more than 4,800 residents.¹⁴ More than 66 percent of Apache County is Tribal land, and Navajo County is not far behind.¹⁵

So much of the Arizona story was echoed by community leaders and partners in Indiana, Kentucky, Minnesota, New Mexico, Ohio, Oregon, and West Virginia. Northeastern Arizona is far different on its face from southern Appalachia, the Powder River Basin in Wyoming and Montana, or the Illinois Basin coal fields. But forests, grasslands, and red-rock landscapes mask similarities faced by rural communities working to build resilient and diversified economies.

Communities are trying to solve complex and integrated problems. Successful energy transition requires everything from housing and workforce training to trail systems and upgraded water facilities. Yet rural energy communities remain universally underserved by federal agencies that are difficult to access, are poorly coordinated, and are facing their own capacity limits and restricted authority to meet communities where they are. Due to the siloed and specialized nature of current transition assistance programs, a single local project can require funding from multiple agencies for many years—an effort that is out of reach of many rural communities with limited staff, expertise, and resources. To be clear, this is not due to federal disinterest or unawareness; there is an ever-increasing interest around rural development and energy transitions as well as in understanding of the limits of existing federal coordination. And for good reason: Rural lands power the country and are therefore a cornerstone to building a renewable future.²⁰

The authors of this report attended the capstone event of the National Association of Counties’ Building Resilient Economies in Coal Communities (BRECC) action challenge. A community of practice supported by the U.S. Department of Commerce’s Economic Development Administration (EDA), the BRECC action challenge provides technical assistance to eight community teams working to transition away from coal.²¹ The authors interviewed members of several communities who participated in BRECC—including teams from Navajo and Apache counties, BRECC staff and consultants providing capacity support and technical assistance to communities, and members of the agencies who make up the Interagency Working Group (IWG) on Coal and Power Plant Communities and Economic Revitalization—to learn about participants’ experiences in accessing and delivering federal assistance programs. This report is not an assessment of the specific efforts of BRECC or the IWG; rather, these groups served as useful access points to gain a more complete picture of energy communities’ needs, agency resources, and the gaps that still exist between them. Outside policy expertise and existing literature on transition was also consulted to provide further context.

The report considers the experiences of coal mining and power plant communities. Oil and natural gas regions will likely have similar needs, but their specific challenges are not fully addressed in this report. The main themes that arose from conversations with communities were:

• The importance of localized federal staff
• A desire for flexible funding mechanisms to provide holistic support
• The need to streamline federal processes

This report provides a discussion of each theme along with a set of recommendations that can serve as stepping stones toward a coherent vision and a comprehensive set of policies and authorities. In addition, the report provides rationale and structure for a National Transition Corporation, which would be designed to facilitate community engagement, prioritize flexible and consistent investment, and enable revenue solutions for coal-dependent communities.

A particularly important aspect of the energy transition is the relationships and connections being built between federal agencies that have transition resources and the communities needing assistance. Communities that maintain contact with agency staff report that these relationships are valuable for navigating the myriad federal assistance opportunities and facilitating connections to other agencies. Increased digital resources have not replaced the importance of interpersonal relationship-building as a foundation for effective program delivery and policy implementation. Moreover, the benefit of these relationships goes in both directions: Agency staff who participate in collaborative efforts such as interagency working groups, rapid response teams, or partner networks report gaining valuable knowledge about partner agencies and are more effective at delivering resources where they are needed most.

Building and maintaining a robust social contract between government and affected communities will be essential for an equitable transition.²² This social contract can be understood as an agreement between government, intermediaries, and communities to take shared responsibility in the economic and environmental aspects of energy transition. This means moving away from paternalism and purely educational measures by government and instead engaging the diversity of stakeholders in decision-making and leveraging grassroots efforts to create sustainable economic and social change.²³ As Titus Tomlinson, director of the Resource Assistance for Rural Environments (RARE) AmeriCorps Program at the University of Oregon, shared: “Progress happens at the speed of building trust.”²⁴ Indeed, evidence shows that robust, long-term engagement with communities is beneficial for increasing local buy-in for decarbonization and renewable technologies.²⁵

There is no comprehensive federal rural policy,²⁶ and agencies continue to work in stringent silos.²⁷ Despite this, federal staff have built critical social capital by engaging directly with rural communities, helping them navigate federal programs, and accessing resources. Examples include the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization’s rapid response teams, the Department of Agriculture’s Rural Partners Network, and the Economic Development Administration’s Economic Recovery Corps fellows, all of which directly place agency staff within localities. Others, such as the EDA Communities of Practice, which supports the National Association of Counties (NACo) BRECC program and the Environmental Protection Agency’s (EPA) Environmental Justice Thriving Communities Technical Assistance Centers (EJ TCTACs), fund intermediaries and regional teams, respectively, to support communities. For example, the BRECC program funded Community Builders,²⁸ the West Virginia Community Development Hub,²⁹ and EntreWorks Consulting³⁰ as partners to provide training, technical assistance, and facilitation to the eight community teams.

This type of localized support may go by different names across programs, but it serves many of the same core functions. These staff, hereinafter referred to as “navigators,” serve essential roles. Their time spent in communities allows them to gain local knowledge and use that knowledge to cultivate more effective partnerships and more beneficial program outcomes. Similarly, their presence and institutional knowledge adds both capacity to small municipal teams and hands-on technical assistance—such as writing federal grants, regional planning, and preparing a comprehensive economic development strategy (CEDS). Another essential quality of a navigator is that they can increase agency capacity. While it is typical to discuss capacity gaps when it comes to local governments, state and federal agencies can also have capacity barriers.

Over the past few years, many federal agencies have struggled to fill positions. For example, in 2023, the Federal Emergency Management Agency (FEMA) had a staffing gap of more than 6,200 people, according to a recent Government Accountability Office (GAO) report.³¹ Collaborative efforts such as rapid response teams allow federal staff to not only connect with communities on the ground but also learn from one another and gain crosscutting agency knowledge. The rapid response team in Wyoming, in particular, demonstrates the strong relationship-building between federal staff and state offices to help improve connections with localities.³²

The Biden administration also invests in navigators within intermediary nongovernmental organizations, including public universities, Tribal and nongovernmental organizations, and other community benefit organizations. For example, BRECC is led by the National Association of Counties, a nongovernmental organization that represents county governments in the United States. The Region 8 EJ TCTAC is implemented by a team that includes land-grant universities in five states and the Alliance for Tribal Clean Energy, among other nongovernmental organizations. These intermediaries receive federal grants and deliver direct coaching for communities, along with technical assistance and capacity support, while assisting in making critical connections to agencies and partners.³³ Philanthropic and nongovernmental organizations are also serving similar roles outside of agency efforts, and networks are being built between rural energy communities themselves. Peer learning has been a critical approach to addressing the many overlapping challenges of energy in rural communities. Groups such as Reimagine Appalachia regularly host calls and webinars to allow community leaders to learn from and connect with other leaders on best practices and effective strategies related to transition.³⁴

It may be overly simplistic to say the most powerful agent of change is personal connection, yet that was the most salient point across conversations. Discussions with community leaders and advocates validated that a localized, personal connection to the federal government, partner agencies, or even state offices is often key in securing grants, increasing the efficacy of program delivery, and building necessary social capital in rural communities that too often feel ignored, and therefore untrusting, of federal efforts.

In Arizona, for example, community leaders attributed success in securing funding to proximity to “key players” who reside in Phoenix and other parts of the state, as well as the ability to cultivate an ongoing partnership. “That’s how you get wins,” said Chris Pasterz, economic development director for Navajo County, Arizona.³⁵ After their time in BRECC, northeastern Arizona counties worked to bring connections made through the challenge back home. At a federal funding summit convened by BRECC team members at the end of February 2024, along with six regional and national partners, including Arizona utility companies and Arizona State University, members from seven federal agencies were physically present. According to Pasterz, getting them there was not easy. He estimated that nearly 60 hours were spent working with the IWG to “get in high” with agency partners and garner their attendance. Pasterz also secured the attendance of Tribal partners. The summit allowed communities to present projects to funders and gain meaningful insight into which agency—or combination of agencies—could help them to meet their goals.

Bringing federal partners to community spaces in Northern Arizona humanized the federal bureaucracy, according to Pasterz.³⁶ Not only was there the benefit of face-to-face meeting, but each party was asked to bring printed items to exchange. In remote places, this is important: While the federal government has made incredible strides in increasing accessibility to information online, these online tools can be overwhelming for leaders to sift through and fall flat in places still struggling with broadband access. Pasterz notes that exchanging business cards, one-pagers, and other “tangible items” for contact is “important for momentum.”

A similar summit of federal partners was held in Minnesota in June 2023. Federal and state officials and staff were invited to a community facing a plant closure for a tour and subsequent discussions. The local tour was critical “to visually grasp the expanse of the power plant, see the main street, the schools, and the railroad … because it helped them [federal officials and staff] to think about the interconnectedness of the problem,” said Carla Vita, director of the Energy Transition Office within Minnesota’s Department of Employment and Economic Development.³⁷ She added, “Federal agencies weren’t this ominous cloud; everyone was sitting right next to each other.”

In Indiana, Ashley Willis, economic development director for Pike County, attributed success obtaining USDA funds to having field staff in the area, noting: “It’s super helpful. I know them by their first name.”³⁸ Similarly, in Kentucky, personal relationships with the Rural Partners Network staff proved positive in the arduous process of securing funding.³⁹

Meanwhile, Colorado’s Office of Just Transition recently hired the first state-level workforce navigator position. This navigator is located within an affected energy community and is intended to develop relationships, assess programs, and “matchmake” between communities and programs. The navigator is also tasked with hosting convenings in local spaces to cultivate peer learning and deepen the understanding of a community’s needs. The navigator is one of Colorado’s “pre-closure” strategies, helping communities proactively plan for transition.⁴⁰

The impact was felt by those without localized federal staff, and the desire for that connection was made clear. In San Juan County, New Mexico, community leaders believed the area lacked direct support and relationships with federal agencies. They experienced “fatigue” around sifting through grant opportunities without someone to help identify the most promising and relevant opportunities and provide guidance on how and when to apply.⁴² Importantly, community leaders in New Mexico also mentioned the importance of field staff for bidirectional information-sharing, an idea central to building a strong social contract. As important as it is to educate communities on opportunities available to them from Washington, it is equally important for federal staff to physically engage with—or, in their words, to “see and feel”—the energy communities that agencies intend to assist.⁴³ Communities that do not have a connection to federal agencies may feel like the federal government does not understand or care about their needs.

Many of the efforts related to local liaisons and navigators are pilot programs deemed too new to see monetary impacts in the form of funding. However, monetary considerations should not be the only measure of an initiative’s quality and effectiveness. These initiatives are working; they have built lasting partnerships, capacity, and competencies that will be a legacy of this administration. Such efforts should be continued, expanded, and coordinated.

The recommendations below offer suggestions for immediate, discrete actions to bolster existing programs and fill gaps. They serve as the basis for a broader set of comprehensive reforms provided at the end of this report.

Increase resources for interagency teams

The IWG should continue to receive federal appropriations to expand its outreach to rural energy communities. This would help to deepen the IWG’s grassroots engagement, which leadership understands is currently lacking. “We know [this work] can be done in a deeper way; we just don’t have the capacity,” said Briggs White, deputy executive director of the IWG.⁴⁴ Increased resources would allow existing rapid response teams to continue assisting communities in strategizing about the future, while also allowing for more rapid response teams, particularly in locations that include vulnerable communities, such as the Upper Midwest or Gulf Coast South.⁴⁵ As the national energy transition continues to evolve, the IWG should be endowed appropriately to continue to adapt and expand engagement efforts.

Expand the Rural Partners Network and the Economic Recovery Corps fellows

The Rural Partners Network and the Economic Recovery Corps fellows are two existing models of community engagement by federal agencies that should receive additional resources to expand their service areas.

The Rural Partners Network is in 11 states and territories, with just a few community networks within each state. It utilizes community liaisons to engage in a grassroots way with communities and state-level officials who can engage horizontally across the federal government to coordinate assistance.⁴⁶ The RPN has received positive feedback⁴⁷ but lacks geographic reach. Increased resources would allow for expansion.

The Economic Recovery Corps is a network overseen by the Economic Development Administration.⁴⁸ Its fellows are trained individuals placed directly in economic development organizations nationwide to assist in strategic planning and locally driven projects.⁴⁹ Expanding the service areas for ERC fellows, particularly in rural areas, is a key way to increase local capacity and close knowledge gaps around economic development.

Utilize existing regional staff more effectively

The USDA has an extensive national network of field staff with the Natural Resources Conservation Service (NRCS) and Farm Service Agency (FSA). Field staff live in rural communities and work with farmers, small-business owners, and other stakeholders daily.⁵⁰ Currently, field staff authority primarily focuses on farm services⁵¹ and food safety,⁵² and their ability to act as navigators to help connect landowners, businesses, and local leaders with rural development, capacity, and planning grants or other relevant resources from USDA Rural Development is limited. Likewise, USDA staff authority and capacity to engage with sister agencies—such as the EDA and EPA—is limited. Providing training, networking, and authority for USDA field staff, and regional staff from other federal agencies, to serve as navigators would increase the ability of the federal government to meet rural communities where they are and help solve integrated challenges—and not just on questions directly related to their own program’s funding resources.

Deploy neutral navigators

There is merit to the idea of navigators not being tied to a single agency or working group. Whether created through a new executive-level office of transition or other initiatives, navigators who can seamlessly work across federal agencies without conflicts of interest are critical to actualizing place-based solutions. The crosscutting knowledge of a neutral navigator can help communities engage with multiple agencies and resources more easily. Stories from communities show that funding field staff is a necessary cost for effectively delivering the historic investments made through the Inflation Reduction Act and other bills. These positions should be permanent and devoid of ties to a single executive office. Regardless of administration, communities deserve to have reliable contact with federal agencies.

The transition away from coal is both a short- and long-term challenge for rural energy communities. These communities need consistent resources that can be used flexibly to meet multiple needs and fill gaps between siloed federal programs. In energy regions where transition means an acute loss of revenue, where federal and state assistance is declining, and where tax policy limits their ability to help themselves, flexible resources are at a premium. Participants in the BRECC action challenge joined partly to understand how they could replace declining coal revenue, but revenue solutions are challenging to implement and often overlooked in transition programs.⁵⁷

In the short term, there is the immediate need for assistance to avoid the collapse of local tax-dependent services and institutions. Then, there is the reality that communities will need flexible resources that can be sustained over a long period of time—ideally, beginning pre-closure and continuing past site closure—to effectively change their economic fabric.

The current methods of federal investment, while historic in their amounts,⁵⁸ are often not nimble enough to avoid a crisis. Agencies want to help rural places, yet often, the federal dollars dedicated to supporting these places are tied up in highly competitive, short-term grants.⁵⁹ It takes a lot of work both to get and use federal grants and to manage their reporting and compliance. Multiple grants in succession are needed to be effective at meeting long-term community goals. Yet this is not tenable for many applications, nor do the same programs exist from year to year if no appropriation is made or if administrations change the names, application criteria, or purpose of programs over time. Grant programs too often do not allow for strategic, long-range planning for holistic community improvement.

Competitive grants are a great way to inspire innovation and encourage experimental projects in transitioning communities.⁶⁰ However, when it comes to improving and maintaining hard infrastructure, schools, water systems, or roads over time, at-risk rural communities should not have to compete against one another. “We are handicapped until our aging infrastructure is dealt with,” said Ashley Willis, economic development director for Pike County, Indiana.⁶¹ In addition, nearly 95 percent of the rural-exclusive funding made available by the CHIPS and Science Act, Infrastructure Investment and Jobs Act (IIJA), and Inflation Reduction Act (IRA) prefers or requires matching by the recipient.⁶² Such matching requirements may dissuade extremely low-capacity communities from applying for much-needed assistance.⁶³

Throughout conversations, there was a desire for more consistent funding to address urgent, foundational needs and for flexible funding to create places that residents would be proud to call home. Grants are, by design, narrow in scope and focus on capital projects versus operational needs vital to the organization’s or municipality’s function. This, along with short timelines, prevents communities from thoroughly addressing interconnected problems because they cannot rely on winning multiple, narrow grants needed to fund holistic community improvement.

“Main street” matters in rural communities, and revitalizing and upgrading social infrastructure, are a critical factor for rural economic and cultural resilience.⁶⁴ A true sense of “home” cannot be achieved solely through paternalistic measures by the federal government. Rather, place-making and economic stimulation through locally owned businesses,⁶⁵ upgraded third spaces such as libraries and community centers,⁶⁶ and community events like concerts and marathons⁶⁷ can build pride and create long-term viability.

Examples of flexible funding that meets community needs

Flexible and consistent resources help resolve issues with communities’ foundational economies and allow space for more holistic and forward-focused planning, which includes uplifting social institutions and overall quality of life. Flexible funding fills the gap between seemingly disparate sectors of a community. While no one model or program is perfect, there exist several examples of consistent and flexible funding throughout the country at varying scales.

In Texas, municipalities can form economic development corporations (EDCs) to support community growth, job creation, and attraction of new industry. EDCs are commonly used in the United States, often established at the state level to attract businesses through various financing and incentive programs. Texas EDCs, in particular, are essential because they provide a dedicated public funding stream to support local strategies flexibly. These EDCs are funded through dedicated sales and use taxes, which voters must approve.⁶⁸ The unique aspect of these EDCs is their ability to essentially fund themselves, rather than rely on repeated appropriations from the state or federal government.

There are more than 700 EDCs in Texas, and the EDC sales taxes alone brought in a total of $1 billion in 2021.⁶⁹ These corporations are independent but have governmental oversight; all expenditures must be approved by the local municipal body—usually a city or town council.

There are two types of EDCs, based on how their sales taxes may be used:⁷⁰

• Type A: Focused on targeted infrastructure, industrial and corporate facilities, property cleanup, and transportation
• Type B: Covers all of Type A as well as “quality of life” projects, tourism, water and sewer facilities, and affordable housing

Type A and B corporations can take on projects that fall in the other designation type without taking on a new sales tax by getting voter approval. This allows greater latitude to use taxpayers’ money. EDCs also enter into performance agreements with any business funded directly by an EDC to protect the public’s investment.

With the number of EDCs continuing to grow in Texas year after year, it is a compelling model for localized control over economic development. “They aren’t perfect, but they are popular,” said Brian Kelsey, a Texas-based economic development consultant and former director of an EDC.⁷¹

Another example of how EDCs can provide flexible funding that fills gaps in federal grants to meet complex and integrated local needs is the Indiana Economic Development Corporation (IEDC). The IEDC helps break down federal and state silos by providing a diverse set of fiscal and planning tools for communities to meet a diverse set of needs. While state chartered, the IEDC operates like a business, not a state agency.⁷² The corporation houses various tax credits, grants, initiatives, and funds to improve Indiana’s fiscal and social outcomes. The state’s Regional Economic Acceleration and Development Initiative (READI) is key to the energy transition assistance question.⁷³ READI encourages communities to “drive the boat” on projects and create community-led impacts.⁷⁴ The program recently received a $250 million boost from the Lilly Endowment to further support quality-of-life projects and arts and culture initiatives, enabling READI to support holistic community enrichment.⁷⁵

At the federal level, formula funding that communities can rely on has helped with transition programs. For example, the Abandoned Mine Land Economic Revitalization program, administered through the Office of Surface Mining Reclamation and Enforcement, provides consistent and flexible support for a wide variety of community improvement projects in coal transition communities.⁷⁶ Using a formula funding model, six states and three Tribal nations currently receive AMLER funding.

Importantly, AMLER does not apply strictly to mine lands. According to the AMLER guidance, “communities impacted by historic coal production” are included in eligible sites.⁷⁷ Equally flexible is how the money may be used. There is no set list of approved projects; rather, the project must meet the “economic and community development nexus,” meaning it must increase both private economic output and show improvement to the community. AMLER is unique in that even though AMLER funds are federal dollars, they can be used as a match for other federal grants—which is generally prohibited unless part of a federal fund braiding agreement.⁷⁸ Community leaders specifically pointed to Virginia and Ohio’s success in AMLER fund utilization.⁷⁹ Completed projects vary widely in scale and nature—from infrastructure to music venues—exemplifying the benefit of consistent, flexible funding in aiding community self-determination.⁸⁰

The commonality among these funding avenues is a centering of communities’ authority and autonomy. However, for the many localities not qualified for AMLER, consistent and widely applicable funding opportunities are not readily available. A typical way that federal agencies have been able to direct money to the ground in rural energy communities is through the development of workforce training—or retraining—programs⁸¹ and attraction of industry through site preparation or energy community bonus tax credits, such as 48C, which is an investment or production tax credit that rewards retooling or reusing coal assets, among other aspects.⁸²

Unfortunately, a hyperfocus on workforce development and siting of new industries is not lifting communities as advertised. In Arizona, a 2021 USDA Rural Innovation Stronger Economy (RISE) grant helped fund a workforce development program in Apache County.⁸³ But Preston Raban, economic development director for Apache County, worries it may be failing to meet its intended goal of strengthening the local area: “Big projects don’t mean anything without covering the basics first.” For instance, no new housing units have been added to St. Johns in decades. Attracting workers takes investment in industry and the communities themselves—the latter being harder to achieve through current federal programming. Without vibrant communities, Raban added, trained or retrained workers “get exported to where there are actually jobs and places to live.”⁸⁴

The conception of “home” in rural areas is a “bundle of material resources, social construction, and embodied experiences,”⁸⁵ not just a new workforce training program. Self-determination and reimagining “home” can feel like luxuries within federal aid silos. The strictness of some federal grants may be inadvertently dictating what communities’ futures look like.

In Shawnee Village, Ohio, the creation of “Second Saturdays”⁸⁶—a block party with music and food—as well as a farmers market has helped to attract both visitors and private investment alike.⁸⁷ A USDA grant supported the farmers market; however, when community leaders asked if a portion of the grant could be used to fund transportation to and from downtown for aging residents to reach the market, USDA grant administrators determined it to be outside the scope of the grant.

Nonrenewable resource revenue requires different fiscal policies

When coal facilities close, one of the most significant challenges facing communities is a loss of revenue that supports schools; local water, sewers, and roads; and essential public safety, public health, and economic development services. Coal revenue, including royalties, severance taxes, and property and sales taxes, is not easily replaced due to structural fiscal risks. These risks include declining state and federal assistance—with federal and state aid being cut from 42 percent to 29 percent of county revenue nationally from 1977 to 2017⁸⁸—along with taxation and expenditure limits imposed on local governments⁸⁹ and economic development policies that rely on tax breaks that often far outstrip the benefits. In practice, the failures of fiscal policy, particularly mismanagement of nonrenewable resource revenue, mean the risks associated with transitioning from fossil fuels to renewable energy are borne by the communities where the resources are extracted, processed, and burned.

One piece of the solution is managing nonrenewable resource revenue differently. Currently, local government coal revenue is spent as it comes in, facilitating deeper cuts to other revenues and masking underlying structural fiscal issues. Saving coal revenue in rainy-day and permanent funds stabilizes revenue, ensures resources are available for closure and transition needs, and benefits both current and future generations. Many states manage fossil-fuel permanent funds, with the largest in Texas, New Mexico, and Alaska.⁹⁰ In particular, New Mexico invests royalties from leasing fossil fuels on state trust lands in the $30 billion Land Grant Trust Fund (LGTF). The New Mexico State Investment Council invests a portion of the principal balance in renewable energy projects in the state, advancing climate and transition goals. In 2023, the LGTF made disbursements that supported public schools worth $1.4 billion.⁹¹

However, only a few of the state permanent funds aid with economic transition. Mitigating the fiscal risk of a transition requires that communities also benefit from permanent savings that would provide stable, long-term, and flexible revenue communities can count on. For this reason, Sen. Michael Bennet (D-CO) introduced legislation in 2023 to create a permanent fund to invest revenue from fossil fuel leases on federal land. The proposed permanent fund would make stable disbursements back to state and local governments that could be used for any governmental purpose, providing a solution to the acute revenue loss in coal-dependent communities.

There still exists a mismatch between federal efforts and community needs. With fiscal futures tied to dwindling resource extraction, assistance must be swift and comprehensive. The following recommendations build on the successes of models with more comprehensive and consistent funding and take into account communities’ clear desire for greater creativity and flexibility.

Tailor formula funding to meet communities’ basic human services and infrastructure needs

Formula funding should address rural energy communities’ basic human services and infrastructure projects. The concept of environmental justice is currently inconsistent with competitive funding for clean drinking water or public safety—things that everyone needs and deserves. Formula funding still requires application and proof of eligibility through demographic or economic data but does not involve direct competition for awards. Rather, exact appropriation amounts differ based on the formula. The IIJA and IRA both contain formula funding.⁹² Community Development Block Grant (CDBG) funds through the U.S. Department of Housing and Urban Development (HUD) are another important source of local revenue for planning and economic development.

However, the formula funding opportunities designated exclusively for rural communities are related to transit or highway infrastructure projects or drinking water and community improvements—and are often disbursed by states, not the federal government.⁹³ Stories from coal communities demonstrate the increasing need for formula funding to facilitate any energy transition. Congress should include more formula funding opportunities tailored to rural energy communities to protect basic infrastructure and essential public services.

Allow 20 percent of a competitive grant award to be spent flexibly

Communities expressed interest in setting aside a portion of grants to fund extraneous costs associated with implementation such as personnel and grant administration tools.⁹⁴ Operational costs are essential to fund successful project implementation and future planning. Setting aside 20 percent of federal grant awards to be unrestricted gives communities increased capacity for implementation or the ability to apply funds toward other relevant projects, perhaps those not covered under the direct costs of the grant.

Institute responsive funding practices to complement community engagement

Appropriations should be made to bolster the community engagement work of federal staff with faster, more responsive place-based funding. This allows for proactive grassroots engagement by federal staff and fills in the gaps between grant cycles to avoid crises in local services.

Replace annual fossil fuel payments with a permanent fund

A federally established permanent fund, such as the Energy and Resource Legacy Fund previously recommended by the Center for American Progress,⁹⁵ could remake the relationship between the communities that extract, process, and deliver coal, oil, and gas to the U.S. economy and the revenue derived from those activities. Rather than use the current model, which leaves communities dependent on volatile royalty and tax payments as they come in, a permanent fund would replace this money with stable and predictable distributions made from a permanent financial asset. The fund could be established with a one-time, upfront congressional appropriation repaid over time with federal oil, gas, and coal revenue payments. The ultimate result would be an immediate, predictable, and permanent source of income for resource-dependent communities as they transition that would cost U.S. taxpayers nothing.

A federal endowment mitigates fiscal risks in regions where leasing occurs on federal land. However, states must also adopt reforms that realign state and local budgets with the underlying economy and support economic diversification strategies. For example, it is no longer viable for states such as Alaska, Montana, New Mexico, North Dakota, and Wyoming to spend coal, oil, and natural gas revenue to eliminate or curtail income, sales, and property taxes. A broad and equitable tax structure is a necessary complement to improved nonrenewable revenue management.

As noted in the previous examples, federal navigators and flexible funding can help coal-dependent communities identify, plan for, and apply for resources that help meet their needs. Communities and agencies agree, however, that providing capacity and technical assistance so communities can navigate a complex and siloed federal bureaucracy is, by itself, insufficient. It is also necessary to streamline and coordinate federal aid in ways that make the federal system less complex and easier to navigate from the beginning. In short, fixing national rural development and energy transition policy will require bottom-up and top-down efforts to build community and agency capacity and better coordinate and streamline programs.

This section identifies some of the barriers and limits of federal coordination and programs, shares examples of how these have been overcome in isolated cases, and offers recommendations for broader reforms.

A clear theme from interviews with agencies was a strong understanding of the problem of siloed and complex federal programs and a desire to make federal programs more accessible.⁹⁶ However, there are many roadblocks internal to agencies’ culture and practice and barriers imposed on agencies by Congress that prevent effective, intersectional service provision. Pressing issues hindering the federal government’s ability to serve rural energy communities include limited agency capacity, silos and inconsistencies among assistance programs, ineffective data-sharing, and siloed funding streams.

Monumental strides have been made in leveraging funds for rural areas’ technological and economic advancement with the passage of the American Rescue Plan Act along with CHIPS, IIJA, and IRA.⁹⁷ However, the capacity, technical assistance, federal staffing, and community benefit programs needed to ensure investments reach communities have received relatively little funding by comparison, are only available in limited geographies, and are poorly coordinated. Program design innovation is similarly ad hoc and varies by agency, hampering the administration’s overall impact of unprecedented investments.

There are more than 400 rural-targeted programs across federal agencies, with 66 brand-new programs created between the IRA, IIJA, and CHIPS.⁹⁸ These investments have added to rural policy’s sedimentary rock layers. Policy formation and investment programs follow a consistent cadence: A problem is identified, a new program is created, and that program gains congressional authorization and is “stacked” on top of the other existing programs—without proper consideration of its consistency with, or potential duplication of, prior efforts. Each layer operates by its own definitions, eligibility requirements, funding streams, and reporting mechanisms, compressing the layers of federal assistance.⁹⁹ The programs become cemented as they gain their constituencies, disincentivizing agencies from consolidating and maximizing efficiency. The problem of rural policy is that each layer becomes ossified as particular interests learn how to mine its resources and defend their claims. A broad and diverse constituency that can advocate for modernization and alignment remains elusive.

It is likely that each program has a sound rationale for establishing eligibility requirements based on the program being offered and the problem to be solved. As David Freshwater from the University of Kentucky notes:

Each agency chooses a spatial unit that corresponds to its specific mandate and objectives. And while these geographies are individually appropriate, the result is a system of programs that lacks coherence and can challenge the local communities trying to improve their economic conditions.¹⁰⁰

Addressing the sedimentary—or siloed—nature of rural policy will require Congress and agencies to make a conscious effort to review and consolidate programs to maximize the efficiency of implementation and of dollars spent. Doing so will be key to making the government easier to navigate and enabling agencies to work collaboratively and make aligned investments that meet multiple and interrelated needs in the same locations.

One challenge to coordination is that, currently, there are more than two dozen definitions of “rural” used across federal agencies.¹⁰¹ Even within USDA Rural Development, each program uses a different rural definition with varying population thresholds. USDA’s Economic Research Service, the U.S. Census Bureau, and the Office of Management and Budget, likewise, define rural in ways unique to their department. Many definitions are based solely on population or job data. Such narrow definitions may not account for “how the area fits into the larger region or consider the economies of scale that may be attained by including rural and non-rural areas in a project.”¹⁰² Similarly, stringent population thresholds may not consider commuting patterns, seasonal variation in population, or natural barriers such as mountains or rivers that affect perceived proximity to nonrural consumer markets.

Interagency working groups are a popular executive method to coordinate agencies and attempt to streamline workflows. One of President Joe Biden’s first executive orders created the IWG, made up of 11 federal agencies and the Appalachian Regional Commission.¹⁰³ The IWG is “the most genuinely interested [in the problem] and more advanced than prior administrations,” said Dr. Erik Pages, an economic development consultant and one of the BRECC action challenge coaches.¹⁰⁴ When creating their Energy Communities Map, the IWG worked to eliminate at least some differences in definitions and metrics, which helped to focus investments to identified localities. The map identified six priority regions and 25 areas in most need of near-term investment¹⁰⁵ and helped to create shared funding priority and eligibility among agencies to deliver disparate programs in a coordinated manner. The IWG map is not perfect. For instance, it does not consider public revenue structures or the outsized reliance of some communities versus others on fossil energy employment. Despite this, the map is a strong starting point.

However, those within the IWG identified a second challenge to meaningfully breaking down federal silos. The map helped member agencies to focus on a set of agreed upon localities. Still, the IWG does not have the bandwidth or authority to require each participating federal agency to align the eligibility and reporting metrics of all their rural funding opportunities—meaning, communities still must navigate different agencies’ various programs, application criteria, reporting timelines, and processes. There is no single “front door” to the government.¹⁰⁶ Even with the inception of tools such as the IWG’s Funding Clearinghouse,¹⁰⁷ community members are overwhelmed when it comes to understanding their eligibility, aligning different program metrics, and braiding multiple funding and reporting streams.¹⁰⁸

Due to the density and specificity of federal grants, grant preparation and management often feels like a “full-time job”¹⁰⁹ for local leaders who already “wear many hats” in their communities.¹¹⁰ The narrow scope of grants often requires communities to use multiple grants to fund one project. And multiple grants means multiple unique reporting requirements. As noted by Ruthie Caldwell, a professional grant writer from Floyd County, Kentucky: “It is a nightmare to coordinate different reporting structures for multiple grants on the same project.”¹¹¹ Mistakes in braiding are not without consequence; there can be legal repercussions. Caldwell describes the threat of legal action due to human error as “horrifying,” with the intricacies of federal programs requiring a high level of institutional knowledge that is not necessarily a given among citizens who take up leadership roles within their communities.

The challenges are not limited to the legal requirements. “There is a knowledge gap about economic development and energy technology for community leaders,” says Grace Blanchard, NACo’s program manager for resilient economies and communities. Annie Contractor, policy director for Rural Organizing, echoes this sentiment, saying that grant preparation often requires community members to “be an expert on everything.”¹¹²

Conversations indicated that some agencies, such as the EDA and USDA, are better than others at “hand-holding”—that is, talking with communities about what and who programs are intended for while also helping with initial planning stages.¹¹³ The U.S. Department of Energy has not historically had a similar reputation, but new internal offices such as the Office of Community Engagement¹¹⁴ and expanded efforts within the Office of Clean Energy Demonstrations¹¹⁵ are promising first steps in cutting down the knowledge gaps for energy technology programs offered by the agency and increasing rural buy-in to sustainable technologies.

Even so, a parallel challenge to these bottom-up alignment problems are top-down problems of coordinating federal agency workflows and funding streams. For instance, the IWG memorandum of understanding (MOU) does not obligate participating agencies to coordinate funding streams or enter fiscal contracts such as an interagency agreement (IAA).¹¹⁶

An aggressive solution to coordinating across agencies lies in the authority Congress extends to buying and selling services between agencies in multiple statutes and processes.¹¹⁷ As stated by the GAO, “When multiple agencies (or separately funded components of an agency) are responsible for achieving a specific policy objective over an extended period of time, permanent authority may be provided to facilitate ongoing, coordinated funding of certain activities.”¹¹⁸ For example, the Consolidated Appropriations Act of 2023 provided the EPA the authority to:

Transfer up to $368,000,000 of the funds appropriated for the Great Lakes Restoration Initiative under the heading “Environmental Programs and Management” to the head of any Federal department or agency … to carry out activities that would support the Great Lakes Restoration Initiative and Great Lakes Water Quality Agreement programs, projects, or activities.¹¹⁹

Congress not only authorizes transfers of funds and services between agencies but has also authorized the creation of joint funds for specific policy objectives. For example, the Joint Incentive Fund (JIF) between the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DOD) can be used for services or systems that facilitate interoperability between the Veterans Health Administration and Defense Health Agency. Each fiscal year, the VA and DOD must transfer a minimum of $15 million each into the JIF.¹²⁰ This joint fund has proven effective in cutting down duplicative efforts between the health offices of both agencies. As one JIF-funded program noted: “The benefits of JIF have been substantial, with considerable fiscal savings for the federal government. Importantly, collaboration has provided our nation’s veterans and military personnel with improved access to … surgical care.”¹²¹

Congress has also mandated coordination that is not based solely on fund-sharing. The Federal Permitting Improvement Steering Council (FPISC) comprises 13 agencies and streamlines the environmental review and permitting process for applicable infrastructure projects.¹²² The council was established in 2015 by Title 41 of the Fixing America’s Surface Transportation Act (FAST-41), which created the council and codified new procedures, timetables, and a dashboard to coordinate agency action and standardize permitting and review processes.¹²³

While the authorization and processes for data- and fund-sharing around common policy goals exist, their use—without congressional mandate—is stagnated by procedural and cultural resistance.¹²⁴ Current mechanisms, such as IAAs, MOUs, and data use agreements (DUAs), are cumbersome to implement.¹²⁵ Preparation and approval of such agreements can take months. Similarly, there are no governmentwide standards or repositories of past examples, even though most share almost identical language. Each is written “ad hoc” and “from scratch,” which overburdens agencies already stretched thin across their own programs.¹²⁶

There is little incentive to change the status quo; agencies are reluctant to share data and funds, often taking the position of “What’s in it for me?”.¹²⁷ This “turf battle” between agencies not only hampers creative problem solving¹²⁸ but also hampers the user experience of those trying to access federal agencies. Without a congressional mandate, the status quo of data- and fund-sharing will remain a roadblock to organic agency collaboration around energy transition and rural policy generally.

Rural energy communities remain universally underserved by federal agencies that are difficult to access, are poorly coordinated, and are facing their own capacity limits and restricted authority to meet communities where they are. Previous sections recommended building local capacity and providing flexible funding to help navigate and bypass the siloed and specialized nature of current transition assistance programs. This section’s recommendations point to steps that can be taken to streamline and coordinate the federal programs themselves to ease access and lower burdens faced by communities with limited staff and expertise.

Create a common grant application

Creating a more standardized grant application across the federal government will help to lessen the burden on applicants and to streamline the review process for agencies. Creating a common application for something of this magnitude is not new; for example, higher education already utilizes Common App, which allows for consistency and equity across admissions processes for thousands of colleges nationwide.¹²⁹ Similarly, JustFund has created a national version for nonprofits that can help move money to historically underserved communities faster.¹³⁰

A common application at the federal level should leverage the wide variety of data already collected about communities through the census and other offices and auto-populate demographic data as relevant to the applicant. A common application for federal grants also has the added benefit of operating as a potential pre-screening method to prevent communities from wasting time and resources on additional components. This helps communities but also eases the federal review process by filtering only those most qualified for the award.¹³¹ Furthermore, the creation of a common grant application may allow for “shopping” of unawarded grants to other agencies who may be able to fund the project.

Modernize and align federal data-sharing and risk-mapping

Data is at the root of effective governance.¹³² Therefore, a continued commitment to modernizing federal data infrastructure and streamlining data-sharing regulations is critical for effective governance.¹³³ Collaborative data-sharing helps to identify “trends, patterns, and relationships that might not be apparent when looking at data in isolation,” creating more comprehensive policy solutions.¹³⁴ The creation of governmentwide standards for interagency collaboration agreements should be a priority, as it would cut down administrative burden and allow for more crosscutting solutions to policy problems.¹³⁵ Similarly, The IWG map is a useful model for further development of tools related to intergovernmental coordination of data to improve program delivery to at-risk localities.

Continued coordination and expansion of IWG member agencies’ data, and the earlier recommendations to expand community engagement efforts, are critical for improving community outcomes. Data-sharing between agencies does not only increase collaboration and effective service provision but also helps to build the “front door” to the federal government.¹³⁶ Along with other recommendations such as a common grant application, linking data across the federal government provides citizens with a more streamlined user experience—regardless of which agency they initially connect with.

Under the status quo, federal grants require communities to compile and report substantial amounts of federal data—including employment rates, household incomes, and population demographics—back to the agencies that collect that data in the first place. Data-sharing between agencies and common applications using this compiled data, including socioeconomic data, land use data, and indicators of distress, can all but eliminate the burden of independent data collection from existing federal databases. Eliminating these data collection needs would allow communities to focus on specific data needs and leave more capacity for community engagement and other priorities.

Create and utilize joint funds to align agency investments

Congress should create a similar shared fund to the Joint Incentive Fund for rural energy communities, with the member agencies of the IWG required to transfer money into the fund each year. This would achieve several goals. First, it would provide a consistent and coordinated stream of funding, greatly reducing the burden of braiding funds that currently falls on communities. Second, in conjunction with other sharing mechanisms, it could help to incentivize agency collaboration on initiatives. Finally, the creation of a shared fund could help to institutionalize the work already done by the IWG to compel agencies to prioritize energy communities.

The previous sections describe substantive and intentional federal investments in capacity, technical assistance, and project grants to deliver resources to coal-dependent communities working to transition their economies. Despite early success, these efforts run up against the limits imposed by siloed and complex federal assistance programs. The experiences of communities and agency staff convey why the federal government must continue to improve agency coordination and align program delivery with communities’ needs. Communities and agencies also made clear that reforms are difficult because the nation needs coherent rural policy. The recommendations in the previous sections are necessary but should be considered stepping stones—changes that could be made immediately to improve capacity, flexibility of funding, and program delivery.

The following section describes the potential for a National Transition Corporation to implement a more comprehensive and coherent vision and policy that can rise to the level of coordination required that does not currently exist.

This report argues that a federally chartered, independent transition corporation is the most comprehensive, flexible method for addressing the scale and complexity of the national transition and rural issue. Federal chartering of quasi-governmental organizations and independent corporations is an already established tool for national and regional policy purposes.¹³⁷ The idea of a corporation centered specifically around energy transition has been broached in academic¹³⁸ and political spheres,¹³⁹ emphasizing its increasing relevance in the conversation around rural energy communities. The idea of a rural-specific development corporation has also been explored in managing nonrenewable revenue to deliver predictable and stable community funding and strengthen local capacity.¹⁴⁰

The recommendation for a federal transition corporation draws on the success of the Millennium Challenge Corporation (MCC). Created by Congress in 2004, the MCC is an international development corporation that partners with low-income countries to invest in poverty reduction, critical infrastructure, and policy reform.¹⁴¹ The MCC holds its partner countries accountable while still being flexible to the distinct goals and cultures of the places it serves—a model with potential for success in U.S. rural policy.¹⁴² This push for collaboration grew from an understanding that applying top-down U.S. tactics to foreign nations would be ineffective and insensitive. Instead, investing in local leadership can build capacity and allow communities to set priorities.¹⁴³

The International Development Finance Corporation (IDFC) is a related federal government tool that enables flexibility to invest in developing countries through a wide range of financial products.¹⁴⁴ The IDFC was created by consolidating the services and subsequently dissolving the Overseas Private Investment Corporation and the U.S. Agency for International Development’s Development Credit Authority into a single authority for foreign development investment.¹⁴⁵

CAP’s conception of this transition corporation also takes inspiration from several state-level mechanisms for flexible funding and incentivizing equitable and holistic transition, such as the EDC model in Texas and the Indiana Economic Development Corporation. The Indiana model is of particular interest not only because of its READI program but also due to the corporation’s structure. The IEDC’s quasi-governmental structure allows the state to operate like a business when investing in communities and attracting industry.¹⁴⁶ The corporation is governed by a board of public and private partners who reflect the state’s geography and diversity. The IEDC is a compelling model for what can happen when an independent, public corporation has the authority and funding to provide essential public functions.

The corporation’s three primary roles

Examples of existing corporations at the local, state, and federal level are not models that can be replicated whole cloth. Rather, each has elements that exemplify the potential for a transition corporation to succeed where existing agency coordination has faced limitations. Each model is also limited in different ways. A federal transition corporation proposal should leverage the best parts of each and combine them in ways most appropriate to the goals and purposes of federal transition priorities.

The proposed National Transition Corporation would have three primary roles:

1. Building people power

As shown throughout conversations with communities and agencies, navigator roles are critical to building trust and lasting capacity in rural places. The proposed corporation staff would act as governmentwide navigators. These navigators can address both top-down and bottom-up problems, working horizontally to coordinate agencies and serving as a “front door” to the federal government for communities. By providing both crosscutting knowledge and capacity, these navigators are an invaluable asset.

To actualize this local support, the proposed corporation would:

• Utilize and expand on the IWG’s mapping of distressed communities to find the most effective regional placements for navigators.
• Place full-time navigators in regional locations to build trust and an understanding of local context. A regional base would enable navigators to travel directly to communities to connect and strategize.
• Train navigators to braid federal funds for communities with multiple federal programs, helping to reduce the burden on community leaders and decrease the risk of misuse of federal grants due to a lack of institutional knowledge.
• Provide training, communities of practice, and lessons from the experience of prior navigators. Navigators working across agencies as part of the corporation would coordinate with existing Rural Partners Network community liaisons, the EDA’s Economic Recovery Corps fellows, the EPA’s EJ TCTAC intermediaries, and the IWG’s rapid response teams.

2. Delivering revenue communities can count on

As this report notes, coal revenues have outsized importance in many of the communities who participated in BRECC—and as these revenues decline, governments dependent on resource revenue will struggle to provide adequate services and make investments necessary to compete in emerging economic sectors. Current fiscal policies directly encourage state and local government dependence on extractive industries and discourage investing fossil fuel revenues for long-term prosperity, which helps to explain the immediacy of the fiscal risk facing the coal-dependent towns and states BRECC and the IWG are assisting. Fiscal policy—specifically, limits on local government capacity to save and reinvest public revenue from natural resource revenue or the ability to align revenue structures with the underlying economy—is an essential factor limiting transition opportunities.

The National Transition Corporation could be chartered to remake the fiscal relationship between valuable publicly owned natural resources and the rural communities that extract, process, and deliver them. Rather than the current model of spending revenue as it comes in, the corporation would invest public wealth for growth and distribute the returns to places that need it. This approach will not diminish what state and local governments receive but will expand opportunities for strategic investments and address communities’ needs.

This permanent fund is intended to replace current volatile and, ultimately, finite revenue streams with stable and permanent resources communities can count on. It would also provide longer-term and more flexible competitive grants and formula grants.

A corporation could effectively manage two funding streams:

• Nonrenewable revenue invested in a permanent fund that stabilizes payments to state and local governments.
• Dedicated funding that the corporation can use to invest flexibly in transition and economic development strategies

The first funding stream would align with proposals to decouple state and local finances from the annual production of fossil fuels. Dependence on these annual revenue streams creates dependence on continued production, placing the risk of transition on the places where extraction occurs. Converting annual payments into permanent resources from a fund would require that Congress capitalize a permanent fund that the National Transition Corporation could manage. Royalties from continued extraction as the transition progresses would be redirected to the Treasury to offset the cost of a one-time appropriation for the corporation.

A permanent fund with nonrenewable resource revenue would also enable the National Transition Corporation to invest public capital in ways that leverage local and regional transition strategies. In many places, including Tribal and rural communities, access to flexible capital is limited. For example, federal grants that help pay for a workforce development program and aligned child care or housing projects require additional capital from private and philanthropic sources. The corporation could invest some public capital to leverage additional resources, particularly where access to capital is limited.

Public capital investments are not grants. Public loans and investments would require returns that meet the corporation’s investment strategy to make a stable funding stream available to communities. Government is often an investor of first resource, willing to take risks that private capital is reluctant to take.¹⁴⁷ For example, the Department of Energy’s Loan Programs Office plays a role in risk-taking by investing in research, development, and deployment of emerging and innovative technologies. And many public institutions, such as community development financial institutions (CDFIs), are proving that investing in rural and historically marginalized communities is less risky than conventionally thought.¹⁴⁸

The independence of a corporation model allows for greater flexibility in structure and expenditures than a federal or state agency. A corporation may have more capacity and autonomy to align and deliver formula funding, block grants, aligned investments, and direct payments. These multiple and coordinated funding streams can empower rural communities to think bigger and further down the road.

3. Streamlining and coordinating federal transition programs

As noted earlier, joint funds are a congressional tool to incentivize and operationalize collaboration in policy areas involving a multitude of agencies. In addition to the permanent fund, the National Transition Corporation could manage a joint fund between agencies with a stake in rural and transition policies. While this would not remove every silo between agencies, it would incentivize streamlining and coordination. Under the status quo, joint funds are managed by one of the agencies that pays into it, adding an extra layer of administrative burden for the selected agency. Allowing the corporation to take on the managerial role of the fund would reduce government costs, time, and complexity over time. The ideal agencies to be included in the joint fund would be the member agencies of the ECIWG and the U.S. Department of Housing and Urban Development, which is not in the IWG but is critical for successful rural development.

A joint fund managed by the corporation, such as the permanent fund, is also more insulated from election cycles. Interagency working groups are temporary. Creating fiscal structures such as those suggested here would ensure a more permanent prioritization of policy goals. Agency buy-in should last as long as the transition lasts—which is far beyond one administration’s time in office.

This proposed corporation can resolve the issues identified in this report without needing to reform or replace existing structures or significantly increase costs. The National Transition Corporation, while independently endowed, is not intended to replace current federal programs. It is possible that a corporation able to streamline agency coordination and program delivery and build community capacity could lower costs and bureaucracy over time. Agencies can and should continue the work that aligns with their individual missions, while the corporation would provide dedicated and flexible revenue to both complement and offset burdens associated with competitive grants. The corporation would also have staff to help navigate the federal government for communities and work freely across government agencies to aid coordination efforts, through braiding of funds and targeting service provision to at-risk localities. Finally, the corporation could manage an interagency fund to streamline government and help build the single front door to the federal government.

Building on the prior recommendations, the National Transition Corporation can fill in the identified gaps in federal coordination and institutionalize the impressive strides made by federal agencies in service to rural communities grappling with energy transition.

The story of Northern Arizona’s “Big Buildup” of coal energy facilities in the ‘70s and ‘80s—and now, their decommissioning—reveals the challenges communities face successfully transitioning away from fossil fuels. This report began by describing the remarkable moment of regional and national coordinated planning and investment that built the coal energy system to address an energy crisis. Today, as the nation addresses the climate crisis, our ability to align investments to transition the energy system away from fossil fuels is limited by a siloed and complex federal rural and energy policy system. A retreat from federal planning and coordination means communities bear many of the risks and must navigate the transition on their own.

The Biden administration has made significant and intentional investments of grant resources, federal staff, and coordination—essentially trying to recapture the country’s ability to do big things quickly while ensuring that the next energy system does not replicate the environmental, social, and economic harms and dependence of fossil fuel energy systems. Early lessons from the Interagency Working Group and the National Association of Counties’ BRECC community of practice show that a recommitment to capacity centered on relationships is working. By bringing together federal, state, Tribal, and local partners on-site in Northern Arizona, leaders could understand each other and connect in ways that were previously elusive. New partnerships leveraged Navajo and Apache counties’ strategy of “getting on base” by cleaning up communities, supporting small businesses, and focusing on foundational projects.

However, the counties’ experience also demonstrates how local problems and the resulting community-driven solutions do not always fit neatly within siloed agency programs and budgets. Despite local leaders’ best efforts, some grants remain costly, difficult to access, and out of reach. As a result, agencies are struggling to collaborate at the pace and scale necessary to address rapid transition.

Improvements can and should be made to existing programs. But the ultimate goal is to circle all the bases and get home. A coherent vision and strategy for connecting the people, resources, and reforms is necessary to address transition holistically. A new transition and rural development corporation could best accomplish these goals. It could serve as the North Star to orient and coordinate agency staff, community leaders, and rural advocates who are already starting to meet and work together to achieve shared goals.