dbeard@dominionpost.com
MORGANTOWN – The Senate Energy, Industry and Mining Committee approved on Monday a resurrected version of a bill to allow coal companies to take a severance tax credit for road improvements and purchases of production equipment.
SB 448 would allow a company to take a credit for up to 20% of its tax liability for the investments, based on a formula spelled out in the bill. A fiscal note with a sister Senate bill in a different committee – with the same sponsor – estimates the bill would cost the General Fund from $50 million to $62 million per year.
West Virginia Coal Association President Chris Hamilton explained the purpose of the bill.
One part deals with roads to accommodate mining operations. He said companies have worked with the Division of Highways to do offsite development work – reinforce bridges, widen a road, put in a spur and so on. This bill, with agreement with the Highways secretary, would allow a company take a credit for the cost of the work up to $100,000, if pre-approved by the secretary.
The second part would allow a company to take a credit against production equipment purchases, he said. After four years of a weak coal market and downward pressure on the coal industry the bill would allow industry to retool and be better prepared to use severance dollars to reinvest in operations.
The association’s original goal was to equalize West Virginia’s severance tax with the lower taxes of neighbor and competitor states. Instead, this bill take dollars and reinvests them in existing operations to achieve the level of productivity and output they wish to see going forward.
Last year, he said, the industry paid $280 million in severance taxes, and if every coal company in the state took advantage of the credit, the reduced revenue would not exceed 20%; realistically they expect it to be around 10%.
Offsetting that, they would expect to see a potential increase in market opportunities both domestic and export, he said.
There are companies in West Virginia, he said, that also have assets in Pennsylvania, Ohio, Kentucky and Illinois that are all competing for a shrinking market. “We some of those markets opening up.” The credit would provide a huge incentive, despite higher severance, to make greater investments in West Virginia, and hire more people.
Last year’s bill was HB 4722. It was originally confined to road and bridge improvements but a Senate amendment expanded it. The original version passed the House 94-3. It was expanded in Senate Transportation and Infrastructure, then died in Senate Finance.
Senate Energy on Monday pass a revised version of SB 448 that includes the natural gas industry. That wasn’t discussed in any detail in committee. It goes next to Senate Finance.
