A bill to cut the West Virginia severance tax on steam coal from 5 percent to 3 percent, a decrease that would reduce state revenue collection by more than $60 million a year, was originated and advanced by the House Finance Committee on Friday.
West Virginia Coal Association Vice President Chris Hamilton told legislators the tax cut will help the industry compete with neighboring states to provide energy for a shrinking number of coal-fired power plants, which he said will help preserve jobs for “God-fearing, gun-bearing” miners.
“This will help keep the jobs as viable as anything will,” he said. “The best-case scenario is, we’ll be able to preserve several hundred mining jobs.”
However, Deputy Revenue Secretary Mark Muchow said the cut will have minimal impact on slowing the inevitable decline of steam coal in the face of cheaper, cleaner alternatives, including natural gas, and said the impact on coal employment will not be “statistically significant.”
“We’re into a shrinking market. I don’t think there’s much upside. It’s all downsize,” he said, noting that coal production nationally declined 1.8 percent in 2018.
West Virginia bucked that trend, with a 3.6 percent increase in production for the year, thanks primarily to an upturn in exports of metallurgical coal used in steel production, Muchow said.
“Natural gas has become very cheap, relative to coal,” he said. “Unless there’s a technological change in the U.S., steam coal will continue to decline.”
He also referenced a 2017 study for the state Senate by West Virginia University economist John Deskins, who concluded that eliminating the severance tax on coal entirely would have only minor effects on production and employment.
“It would be hard for a 5 percent price change to overcome the logistical systems that these companies have put in place over years and years,” Deskins stated.
Delegate Isaac Sponaugle, D-Pendleton, said that, if the Coal Association’s estimate that the tax cut will preserve 500 mining jobs is correct, that amounts to a $120,000-a-year state subsidy for each miner.
“I just don’t think it’s going to have much impact,” Sponaugle said of the tax cut. “John Deskins, a very conservative economist, said it would have minimal impact two years ago.”
Delegate Daryl Cowles, R-Morgan, said he has opposed proposals to fund the Public Employees Insurance Agency through increased severance taxes on natural gas, but he added that he also is concerned about the impact of cutting revenue needed to balance the state budget.
“This is a $61 million hit to the budget,” he said.
A majority of committee members, however, shared Delegate Daniel Linville’s support of the bill.
“Five hundred jobs is not insignificant to me,” the Cabell County Republican said, adding that he has seen the effects of the decline of the coal industry on downstream jobs in his county.
The bill now goes to the House floor.