Coal Tattoo

Revised report: Coal still costs W.Va. government

Gazette photo by Chip Ellis

Following up on critics from the coal industry and from industry boosters at Marshall University, the folks at the West Virginia Center on Budget and Policy and Downstream Strategies have revised their major report, The Impact of Coal on the West Virginia State Budget.

The result?

Their analysis shows that, overall, coal still costs the state budget — but not nearly as much as the initial report issued in June had estimated. The new figure is an annual cost to West Virginia’s government budget of more than $42 million. That’s compared to the $97.5 million estimate in the original report.

Downstream Strategies and the West Virginia Center on Budget and Policy revised their findings based on a review of criticism leveled at the original report by Cal Kent and Kent Sowards of Marshall University. You can read that criticism here and the original report here.

Ted Boettner, executive director of the Center, said:

We agreed with a number of their suggestions, however, several are simply mistaken and fail to acknowledge many of the costs associated with coal mining. After incorporating their suggestions that were valid, we found that the net impact of the coal industry for the state budget in fiscal year 2009 remains negative, meaning that the industry imposed an overall cost on the state and its taxpayers.

Among the changes made in the analysis:

— Local property taxes that impact the state budget — and not just state property tax revenues from coal — were added to the report. That added $31.5 million to the estimate of direct coal industry revenues.

— The “purchase for resale” tax exemption should not have been included in the report, as most other states do not tax these intermediate inputs and the exemption is uniform across all industries. This $85.5 million was deducted from the original report’s estimates of expenditures by the state for coal.

— The costs of thin-seam coal tax credits — $61.7 million — was added to the expenditures supporting the coal industry.

The revised report also emphasizes the importance of “legacy costs” of the coal industry for things like damage to roads and bridges and funding needs for reclaiming abandoned mines and bond forfeited mine sites, which amount to nearly $5 billion.

Rory McIlmoil of Downstream Strategies said:

The Legislature should consider enacting new policies that ensure that the coal industry, rather than the state’s taxpayers, pays for the costs associated with coal-related activity.

And Boettner said:

We hope that the conversation about coal’s true impact continues and that the committee funds a more comprehensive study of the full range of costs and benefits associated with the industry, as was suggested by Delegate Nancy Guthrie at the September meeting. Understanding the true impact of the coal industry is vital when making policy decisions pertaining to energy and economic development that will impact our state for decades to come.