Setting record straight on coal severance taxes

Letter to the Editor

By Bill Raney

West Virginia Coal Association

We, the West Virginia Coal Association, write today to clarify the record regarding statements of Mr. Jim Justice, as contained in The Dominion Post’s article, published Oct. 2 entitled “Jim Justice Talks with Editorial Board.”

We also want your readers to know that Senate President Bill Cole, also a candidate for governor, has publicly stood up for the great West Virginia coal miners.

Over the past two years, Sen. Bill Cole has demonstrated strong leadership in making sure that significant policy initiatives were passed in our Legislature, all of which were designed to make our coal more competitive and keep our coal miners, the best in the world, working. Without these significant policy changes, there would not be as many miners working today as there are, so his leadership has been critically important.

Mr. Justice’s statement that “steam prices have risen about 60 percent in last 45 days. That means miners will go back to work,” is misleading because many of our member companies have not had any increase in pricing.

These companies clearly have been devastated by the expansive unemployment and other negative effects brought on by the eight-year anti-coal policies of the Democratic Obama administration. We are hopeful the prices for steam and metallurgical coal will rise, because with the significant law, regulation and policy changes completed by Senator Cole and the Legislature, we in West Virginia stand a real chance of competing and keeping our miners working.

Finally, the statement that reducing the coal severance tax rates in West Virginia will not make West Virginia coal more competitive and will, instead, “put some money in my pocket, or put some money in Bob Murray’s (president and CEO of Murray Energy) pocket” could not be further from the truth.

All savings from any reduction in the West Virginia coal severance tax would typically flow to electric utilities and their rate-paying customers in the state, per the terms of routine, individual coal sales agreements. This has been confirmed in numerous dis- cussions with our members as well as by Mr. Murray, himself, having publicly stated this before the Legislature and during this year’s Coal Symposium.

It is important for your readers to understand that the return of the $0.56/ton additional severance tax was in accord with a promise made 10 years ago, when the in- dustry volunteered to help provide the funding necessary to privatize the Workers’ Compensation Program in West Virginia.

Once privatization was successfully completed, this additional tax always was to be removed. Thanks to the leadership of Cole, the law removing this additional tax was approved by the Legislature this year and approved by Gov. Earl Ray Tomblin. I am told by our members that $0.56/ton truly does make a difference in our coal com- panies’ ability to market steam coal to the utilities who can take advantage of lower fuel costs.

A great deal of work has been done over the past two years to show the competitive benefits that additional reductions in our severance tax rate would bring to getting or keeping West Virginia coal into today’s ever-tightening market.

This is particularly true with steam coal, as mentioned earlier, since it would lower the price of our coal to utilities that are usually paying the taxes per typical fuel purchase agreements. Since our severance taxes are higher, from a dollar amount, than any of the other coal-producing states, a lower West Virginia tax would mean lower-cost fuel and naturally benefit our ability to sell to the ex- isting coal-burning utilities.

This was confirmed by studies completed over the past two years by PriceWaterhouse Coopers and Crowell Moring, which used current Census date to determine that a 2 percent reduction in our 5 percent severance tax would preserve 1,261 coal mining jobs and 9,332 secondary jobs in our state.

Clearly that is significant, and it is extremely important for your readers to understand that Cole recognizes how critical that is for keeping our existing coal miners working and, hopefully, putting unemployed miners back to work.

— Bill Raney is president of the west virginia coal association

Letter to the Editor
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