Severance taxes

This week I decided to take a look at the Coal and Oil and Gas severance tax from two different Coal Field elected officials, Delegate Rupie Phillips D-Logan and Senator Art Kirkendoll D- Logan. The two elected officials are from the same county but have completely different views on cutting severance tax for the coal industry. They are concerned how this will affect not only Logan County, the coal fields, but the entirety of West Virginia.

Delegate Phillips introduced House Bill 4210 to the House of Delegates on Jan. 21, this bill would reduce the severance tax rate for certain coal mining companies. “You’re talking major money,” Phillips said. “My goal in this was to give them some kind of incentive.” Phillips also said the measure could help save many of the state’s existing mines that are in danger of shutting down. “I’m trying to extend the life of the mines,” Phillips said. “If you don’t have coal, you don’t have coal miners. This is for the coal miners.”

In another piece of legislation Senate Bill 419 which was introduced by Senator Kessler D- Marshall would remove the “excess” severance taxes on coal and gas production that were put into place in 2005 to pay off old debts related to the state’s workers’ compensation fund. Thanks largely to the Marcellus Shale boom, those debts are scheduled to be paid off within the next two years, about a decade ahead of schedule, so Tomblin proposed removing the taxes. The bill would use the excess severance tax money that’s collected through the end of June to help fill the state’s gaping $354 million budget shortfall this year. That would be the first time that money went to general revenue, rather than the workers’ comp debt. Then, as of July 1, the excess severance taxes would disappear. “If you want more layoffs, I encourage you to vote against this bill, kill it, lay more people off,” said Delegate Rupie Phillips. Phillips and several others noted that West Virginia’s severance tax is higher than in surrounding states. Governor Earl Ray Tomblin signed this bill into law Monday.

The question that I continue to have as I am doing my research is that even though West Virginia has a higher severance tax, the surrounding states of Kentucky, Ohio, Virginia and Pennsylvania, which have lower coal severance taxes continue to lose coal jobs also. Because here in central Appalachia, mainly southern West Virginia and eastern Kentucky, coal continues its structural decline. The extensively-mined coal seams of the Appalachian coalfields are thinning, leading to higher production costs compared to the Illinois coal basin (Illinois, Indiana, and eastern Kentucky) and the massive strip mines of Wyoming’s Powder River Basin. Coal production in Central Appalachia is forecast to decline to half its 2010 level by the end of the decade.

But with the decline of coal and the monies that coal affords to our communities. Now they will have to do with even less without the coal severance tax since they have not looked forward to diversify their economies. Webster County Commissioner Jerry Hamrick is one local who is left with few options to revive his fading communities. “We’ve cut budgets in all the departments and we’re not funding any organizations like the fire departments or libraries or anything like that, we also had to make the employees start paying a share of their insurance. We’re just keeping our head above water right now,” he said. “It’s a struggle every day to try to figure things out.” Webster County, whose primary revenue stream comes from the coal industry, is one of the 24 West Virginia counties that share the 75 percent of the state’s coal severance tax revenue that goes to coal-producing counties. “I hate to think we’re going to have to lay more people off, but I don’t know,” Hamrick said. “We’re working, trying to see what we can get done. But it don’t look good.”

Evan Hansen, said diversifying the economy might be the only way out. “I don’t think there’s any good solution for the short term,” Hansen said. “In the long term, I don’t think there’s any alternative to strengthening the economy so it becomes more diversified. “It clearly is true there are some counties where economic development and diversification is more challenging than others, but I still think that that needs to be the goal,” he added. “Any time you rely on a single industry, no matter what it is, you’re subject to ups and downs. It’s something you have little control over.”

On Wednesday the Senate passed out Senate Bill 705 that was originated by Senate Finance Committee Monday afternoon. The purpose of this bill lowers the current five percent tax by one percent a year for two consecutive fiscal years beginning July 1, 2017. “This is a good way for us to tell the coal industry, which is struggling right now to survive, that we believe in you and we’re willing to help,” said Senator Boso R-Nicholas. Two coal field Senators–Ron Stollings from Boone and Art Kirkendoll from Logan–opposed the bill, saying it will take away the needed tax revenue from their communities and it will actually provide little help for the industry. “I put to you that this too little too late and I also say to you that it’s fiscally irresponsible.” Kirkendoll said, “I’ll be there to support the industry, but this is not the issue that… turns it around.” “A lot of you people just think you know the economics of coal,” Kirkendoll said. “You don’t know what it’s like to sit there as president of county commission waiting on a $400,000 check to do things in your area and the check is $72,000. “If I thought it would create jobs I would push the button,” he added. The bill passed 19-15 with the lone democratic vote coming from Senator Yost D- Brooke.

I can see that there is a difference between a Delegate who proudly claims that he is a COAL DELEGATE on his license plate like a badge of honor. Who at the beginning of session was overheard saying that he was going to leave Logan County because there was no longer work for him there and he was going to have to move north to find employment in the coal industry and a Senator who is a past county commissioner who is no longer listening to the coal industry and wants to look for ways to diversify not only Logan counties economy but that of the coal fields and all of West Virginia so that we can expand STEM in our schools not cut education.