WV Needs It’s Coal Severance Tax, Tell the Governor

by Duane Nichols on March 14, 2019

Call WV Governor’s Office 304-558-2000

Will a Severance Tax Cut Put Coal Miners Back to Work? (Probably Not)

From an Article by Sean O’Leary, WV Center on Budget and Policy, March 10, 2019

On Crossover Day, the West Virginia House of Delegates passed two bills that have the intended purpose of boosting coal production and putting coal miners back to work. Unfortunately, they chose to do so in a very ineffective and expensive way, through cuts and rebates to the severance tax.

HB 3142 would cut the severance tax on steam coal from five percent to three percent. The bill, which had originated in committee just a few days prior to passage, had virtually no analysis. A fiscal note was produced just hours before the bill was up for a final vote, showing a price tag of $60 million in lost revenue, with at best only 500 jobs created, with 100 more likely, meaning the tax cut would cost between $120,000 to $600,000 per job created.

Why so few jobs for such an expensive tax cut? Just look at the math. If every penny of a two-percent reduction in West Virginia’s severance tax on steam coal went to reducing its price, the price would drop by only $1.08 per ton. Currently, West Virginia’s steam coal is currently $7 per ton more expensive than coal from Ohio, $13 per ton more than Pennsylvania, and $10 per ton more than Kentucky. West Virginia steam coal is nearly $15 per ton more than the national average. And there is no guarantee that the coal companies will use the tax savings to lower the price.

Besides that, West Virginia’s biggest competitors in the coal market aren’t our neighboring states, they’re western states like Wyoming and Illinois. Since 2001, eastern states like West Virginia have lost significant market share to western states with greater productivity like Wyoming. And Wyoming’s market share has grown, even with significantly higher taxes than West Virginia.

But beyond competition from coal in other states, West Virginia coal faces even stiffer competition in its own backyard from natural gas. Booming natural gas production, which is subject to the same five-percent severance tax in West Virginia as coal, has hurt the coal industry as well. The Marcellus and other shale plays have led to a glut of natural gas, driving energy prices down, making gas-fired electricity often a better deal than coal.

West Virginia coal has already enjoyed a significant tax cut in recent years. A 56 cents per ton tax on coal production went into effect in 2005, with the revenue it generated going to pay down old debts associated with the state-run workers’ compensation system. The tax was terminated in FY 2017. Before its termination, the tax produced $64.4 million, roughly the same value as the reduction in severance tax in HB 3142. But since 2017Q3, coal mining employment has been flat.

There’s little evidence to support a severance tax cut or tax credit for coal as a tool to increase production and employment. Overall, the state has little ability to influence the forces affecting the coal industry, be they competition from natural gas, environmental regulations, productivity, or transportation issues. The severance tax is important to West Virginia’s budget, and it’s important that we keep it.


Urge Veto of Coal Tax Cut, Urgent Appeal to WV Governor

From the West Virginia Center on Budget and Policy, March 12, 2019

House Bill 3142 is a massive giveaway to coal company executives that will do little to stop the decline of the coal industry.

Instead of handing more than $60 million to mostly out-of- state coal operators, Governor Justice should veto this irresponsible legislation and invest in things that working families need, like expanded access to child care, an earned income tax credit, and pay raises for our struggling public employees.

Read more in this editorial and this post on why this is such a bad proposal for West Virginia.

Call (304-558-2000) or email Governor Justice today and urge him to veto House Bill 3142.

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Marie Cusick October 25, 2019 at 1:55 am

Poll: Broad Support for Wolf’s Plan to Tax Gas Drillers to Pay for Infrastructure

From Marie Cusick, Allegheny Front, August 16, 2019

A new poll from Franklin and Marshall College finds widespread support among Pennsylvania voters for Governor Tom Wolf’s plan to pay for infrastructure upgrades by taxing natural gas drilling companies.

The poll shows more than two-thirds of respondents either “strongly” or “somewhat” favor Wolf’s Restore PA plan.

The proposal calls for $4.5 billion in infrastructure initiatives over four years, funded by a severance tax on natural gas — a tax paid based on how much gas is produced from wells. It would target things like mitigating flooding, addressing blight and expanding broadband access.

Berwood Yost directs the Center for Opinion Research at Franklin and Marshall, and says the support goes across different demographic and ideological groups.

“I’m not really surprised,” he said. “Given that we’re marrying two topics together things we generally know people support—infrastructure improvements and natural gas taxes.”

Wolf spokesman J.J. Abbott said the poll is a validation of the broad support behind the governor’s plan.

“Every other major gas producing state requires industry to pay for the right to remove this precious natural resource,” Abbott said in an email. “These other states reinvest this money to fix infrastructure, to provide services to their citizens, and to spur economic development. Investing revenue from a commonsense severance tax in projects to spur our economy forward simply makes sense.”

A spokesman for the gas industry trade group, the Marcellus Shale Coalition, declined to comment on the poll results, but pointed out that the gas impact fees drillers pay on a per-well basis have brought in over a billion dollars since they were enacted in 2012.

The poll is based on interviews conducted online and over the phone with 627 registered Pennsylvania voters between July 29 and August 4, 2019. The margin of error is plus or minus 6 percent.

This story is produced in partnership with StateImpact Pennsylvania, a collaboration among The Allegheny Front, WESA, WITF and WHYY to cover the commonwealth’s energy economy.



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