DUGGER, Ind. – Peggy and Martha Marlow collect artifacts of this small town’s history for a storefront mining museum that Martha helped open more than 30 years ago.

Tin dinner buckets, carbide headlamps and battered hard hats line the museum’s crowded shelves. Stacks of old letters and documents include rosters of living and deceased miners, scrip once used in company stores, yellowed newspaper clippings recounting mine disasters and scores of panoramic photos of union gatherings.

Admission to the museum is free, but for a dollar a visitor gets a copy of the town’s “Centennial Book,” published in 1979. On the cover is a photograph of the old Dugger Mine and its 7,000-ton walking dragline excavator.

The Marlows don’t mind the dust kicked up by heavy coal trucks that rumble past their museum, nor the piercing whistle of a nearby train that clatters through this town of 920 people.

They’re optimistic that the nearby Coal Miner’s Café, closed after being hit by a coal truck last year, soon will re-open, hopefully in time for the 35th annual Dugger Coal Festival this fall. Until it closed, the café was one of only two places to eat in town.

But the Marlows worry for the industry that has sustained Dugger since it was founded as one of Indiana’s first mining towns. They fear a federal plan to combat climate change may kill hundreds of coal-related jobs, and in turn accelerate the flow of people out of town.

“If we lose the coal mines, there’s nothing left,” said Peggy Marlow, who comes from generations of miners. “All we know in Dugger is coal, coal, coal.”

It’s a worry that resonates here in Sullivan County and throughout rural southwestern Indiana. About 2,500 people mine a major coal vein that ribbons beneath the ground of this region, working in two-dozen active surface and underground mines. Miners make an average of $82,000 per year.

And, setting aside climate change, their prospects have looked strong despite the popular narrative of an industry in decline. While a steady procession of mines in Indiana has closed over the last two decades, there’s been new investment. Four years ago, Peabody Energy, the nation’s largest coal producer, opened the Bear Run mine near Dugger. It’s the largest surface mine east of the Mississippi River, employing more than 500 people.

Last year, miners in southwest Indiana extracted 40 million tons of coal, 15 percent more than a decade ago.

Retired miner John Cox, who has two sons-in-law who mine coal, moved back to his hometown of Dugger last year to be closer to his 10 grandchildren. He’s heard the government’s new rules are intended to protect the planet for future generations but he’s skeptical. He echoes the concerns of the United Mine Workers of America, which argues global pollution may get worse if industrial jobs shift to countries without emissions rules.

“This is what will finally kill the coal industry in the U.S.,” said Cox. “I’m telling you, if they shut down these mines around here, it’s going to devastate this little town and all the little towns around here.”

Coal Jobs at Stake

The federal initiative gives Indiana three years to devise plans to cut carbon emissions by 20 percent by 2030. The national goal is higher — 30 percent — but Indiana gets credit for utilities that have started converting coal plants to natural gas and have shut down aging facilities.

Environmentalists say the government’s target is reachable. "And it's a challenge we really have to take on,” said Jodi Perras, head of Indiana Beyond Coal, in a statement issued when the plan was released. She heads a campaign launched by the Sierra Club more than a decade ago to reduce the number of coal-fired power plants in the state.

Supporters of the U.S. Environmental Protection Agency’s plan say Hoosiers already are suffering the effects of climate change tied to greenhouse gases and global warming, including droughts and floods that have cost farmers millions of dollars.

The EPA’s rules, supporters say, will lead to more “green” jobs, such as making energy-efficient insulation or producing wind turbines and solar panels.

Still, coal jobs will take a hit.

Economist Michael Hicks, of the Center for Business and Economic Research at Ball State University, said Indiana has a 300-year supply of coal. But the state must wean itself from its dependence on a fuel that generates 80 percent of its electricity — twice the national average — to meet the EPA’s goal.

Indiana ranks fourth for carbon dioxide emissions and has two of the nation’s top-polluting power plants.

“We will lose lots of coal production, and lots of coal jobs, and that will have a big impact on the Indiana counties that mine coal,” Hicks said.

A decade ago, coal was mined in 19 of Indiana’s 92 counties, all along the state’s western border. It’s now concentrated in 10 mostly rural counties that historically have higher unemployment than the rest of the state. Here, the loss of jobs is a rallying cry for opponents of the EPA’s plan, including Gov. Mike Pence.

Backed by the state’s biggest manufacturers, Pence says tougher standards will chill the state's business climate by killing jobs and raising the price of electricity. During a visit to Bear Run in early July, he told workers he stood with them in what he called the Obama administration’s “war on coal.”

Peabody Energy officials, reportedly counting on a $6 billion revenue stream from Bear Run, were glad to have him. They hope Pence’s warnings resonate beyond Indiana’s coal-producing counties and spur opposition.

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The final carbon plan won’t go into effect until next year, and federal regulators are still in a public comment period that could alter the rules.

“We’ve got a tough story to tell,” said Keith Haley, who oversees Peabody’s Midwest operations, including Bear Run. “But the reality is that Indiana will be dependent on coal for a very long time.”

Booms and Busts

Dugger’s existence has depended on coal for a long time. The town was named for the Dugger family that sunk the first mine in 1879. Within five years, Dugger was one of largest villages in eastern Sullivan County. The only place for 225 townspeople to shop was the store owned by the mining company, which paid workers in scrip.

By 1920, the area was dotted with mines, and the population peaked at more than 1,600.

There’s been a steady decline since. There’s not much else in the area to attract new residents. Sullivan County is mostly rural. After its two coal mines, the biggest employers are Hoosier Energy’s coal-fired power plant, a state prison, the county hospital and Wal-Mart.

Dugger, surrounded by old stripper pits now converted into lakes teeming with fish, is a 45-minute drive to the nearest interstate and the closest big city, Terre Haute.

Town Council President Larry Bedwell, a third-generation miner, said people understand the fluctuations of the coal industry. “Mining is nothing but booms and busts,” he said.

Bedwell retired in 2000 from Peabody Energy, as coal companies in Indiana were cutting back production and jettisoning union mines. Production in the Illinois Basin, which covers part of Indiana, Illinois and western Kentucky, shrank by more than one-third from 1990 to 2010 amid environmental concerns over the high sulfur content of its coal.

Anti-pollution technology changed that. A resurgence in Indiana coal stems from equipment mandated by an EPA rule in 2005 that required reductions in sulfur dioxide emissions. As some power plants installed sulfur “scrubbers” on their coal-fired boilers, which made the state’s easy-to-mine coal competitive again.