Oh, Sen. Manchin … about those coal subsidies …

February 16, 2011 by Ken Ward Jr.

We had some fun two weeks ago asking the question, Does Sen. Manchin really think coal doesn’t get ‘a penny of subsidies’?

Well, now it seems that President Obama is interested in making it so. As my buddy Peter Gartrell reported for Platts:

The coal industry stands to lose nearly $2.6 billion in federal tax incentives over the next decade as part of the Obama administration’s proposed fiscal 2012 budget released Monday.

The administration’s proposal is identical to coal incentives cut in its budget last year. The White House is aiming to meet a G-20 climate change agreement from 2009 in which member countries pledged to phase out fossil fuel subsidies.

Repealing the tax provisions would “foster the development of a clean-energy economy and reduce our dependence on fossil fuels that contribute to climate change,” the administration said in its budget message. The tax incentives equal less than 1% of the coal industry’s revenue over the next 10 years, according to White House projections.

A complete rundown of the subsidies in question is available here, (See page 18)  but here’s the short version from Peter’s story:

Under the budget proposal, coal companies would no longer be able to expense exploration and development costs; use percentage depletion for hard mineral fossil fuels; or claim domestic manufacturing deductions against coal production income. Royalties from privately owned coal blocks would be treated as regular income rather than capital gains for tax purposes, translating to a higher tax rate.

Peter also reports that:

The mining industry was preparing to fight any elimination of tax benefits, no matter how small, as well as proposed cuts to coal-related research programs found elsewhere in the Obama budget.

“We just don’t think that raising taxes in this economic environment makes sense, it’s a disincentive,” Luke Popovich, a National Mining Association spokesman, said, calling the budget a “missed opportunity.”

The last time the Obama administration proposed these cuts, in 2010, Sen. Jay Rockefeller, D-W.Va., opposed them — falsely suggesting that the proposals were aimed at hurting the development of carbon capture and sequestration technology.

This time, Sen. Rockefeller had this to say about the cost-cutting measures included in President Obama’s budget:

.. We must not go down the dangerous path of reducing our national deficit on the backs of hard working American families. Shared sacrifice also has to include those at the top – by requiring wealthy individuals and multi-national corporations to pay their fair share.

Does that include multi-national coal corporations? We’ll have to wait and see.

As for my good friend Sen. Manchin, he issued his own statement about the Obama budget, saying:

We must not let the budget debate be driven by party interests for the next election. It must be driven to serve the next generation and beyond. What we have is a budget proposal from the President designed to get our attention, but given our fiscal challenges, it does not go far enough. This is not what the country needs or expects.

Stay tuned …

4 Responses to “Oh, Sen. Manchin … about those coal subsidies …”

  1. Bo Webb says:

    Amazing that an extractive resource industry that is destroying our air and water, our two most critical and valuable resources, receives tax incentives on the backs of the citizens they are causing harm to.

    Senator’s Rockefeller and Manchin should be working on a coal tax to help people in mountain communities bury their dead after being poisoned by toxic fallout from mountaintop removal blasting. They both need to find their soul; they have either left it somewhere or ignored it for so long it has left on its own.

  2. Graybeard says:

    One issue not addressed by Ken is the assertion by the administration that the coal companies are also subsidized by the OSM Title V regulatory grants to the states where OSM matches the states on a 50/50 basis. To reduce this so called subsidy to coal companies the adminstration is poposing to reduce the regulatory grants to the states by 11 million dollars in 2012 budget year almost 16% starting in October of this year. This is a huge hit for the states as for every $1 eliminated on the federal side there is $1 eliminated on the state general fund side. Thus a 16% reduction equates to a 32% hit on state regulatory budgets. That size cuts will certainly mean layoffs and reduced staff including inspection staff. Small coal producing states may not be able to continue to administer the Title V programs with that size cuts and it is questionable for the others. OSM does not have the staffing or the funding to take over state programs.

    To eliminate true subsidies, tax breaks and the like for coal companies is one thing but to reduce regulatory programs ability to ensure laws and regulations are met is another.

  3. Lisa deGruyter says:

    The West Virginia Center on Budget and Policy posted this on corporate taxes by industry last week, based on a study done at NYU and reported in the NY Times and The Economist:

    Retail’s effective tax rate is 37% – coal 17%. The market average is 29%.

    So if the tax incentives proposed to be eliminated are “only 1%” of revenue, it looks to me like they aren’t near all of the tax advantages coal has over the market average, let alone the most highly taxed industries.

  4. William J. Lepetomane says:

    Only the Gazette and its minions could believe that NOT TAXING a company is a subsidy.

    Definition of SUBSIDY
    : a grant or gift of money: as a : a sum of money formerly granted by the British Parliament to the crown and raised by special taxation b : money granted by one state to another c : a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public

    So, according to Kenny, failing to take away somebody’s or an entity’s money by threat of goverment force is a “grant or gift of money.” You can’t make this stuff up.

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