The Question of Subsidies

Sen. Joe Manchin at a 2012 Senate hearing:

What I don’t understand is all of these energies you’re talking about … the only energy source which is the greatest source that we have so far that we’re so dependent on right now is coal …

It doesn’t get  a penny of subsidies.

From a recent Grounded post on declining coal severance tax caused by special tax treatment for thin seam coal:

The state Legislature created lower severance tax rates in 1997 for coal mined from thinner seams. While the regular rate paid to the state is 4.65 percent of sales, the new law created taxes of 1.65 percent on coal mined from seams less than 45 inches thick and 0.65 percent on coal mined from seams less than 37 inches thick.

Because the new tax rates applied only to thin-seam coal and only to coal from new mines, the difference it made in state tax collections was small in the early years: $3.4 million in 1998, rising to $8.3 million in 2000 and $33 million in 2005, according to numbers Muchow provided.

But as old mines close and new mines open and as more thinner coal is mined, the difference it makes in state tax collections has grown — reaching about $98 million in 2011 and falling back a little to $88 million in 2012.

When government subsidizes a business practice, that practice increases, pushing non-subsidized practices out of the market place.  In the case of thin seam coal in WV, this has led directly to all WV tax payers having to take up the slack for declining coal severance tax collections.

In WV, the coal industry not only writes legislation to provide its own subsidies, but coal company lobbyists also write legislation designed to kill emerging energy technologies.  Taylor Kuykendall and Pam Kasey over at Grounded have done an excellent job of explaining why the 2009 Alternative and Renewable Portfolio Standard law was rigged by the coal industry to crush renewable power in WV.  Kuykendall wondered why the coal industry didn’t mind the law that superficially appears to subsidize renewable power.  Here’s what he discovered:

Even though it is an industry quick to attack policies it thinks will restrict its business, power generators and coal miners alike have not taken issue with the West Virginia Alternative and Renewable Energy Portfolio Standard enacted under then Gov. Joe Manchin.

Why? We talked to Bill Raney, president of the West Virginia Coal Association, a few months ago, and he explained to us that his industry group helped write the bill. Keep in mind, members of Raney’s organization represent about 98 percent of the coal produced in West Virginia.

Similarly, Jeri Matheny, a spokeswoman for American Electric Power, said her company had no problem meeting the requirements of House Bill 103.

AEP has no problem meeting the requirements of the ARPS because AEP and coal industry lobbyists inserted language in the law that allows them to earn credits toward the standard by burning coal in their power plants.

I have gotten very tired of listening to WV Consumer Advocate Byron Harris tell me that he is opposed to a real renewable portfolio standard or a feed in tariff for solar power because it would raise electric rates.  He doesn’t like rate payers subsidizing renewable power.

But subsidizing the coal industry and coal-fired electricity is what the WV PSC and the WV Legislature do every day, for an industry that destroys people, their homes and their land, not to mention the health of West Virginians all across the state.

The thin seam coal subsidy is one of probably hundreds that the WV and US coal industry currently enjoys, at the expense of US citizens.  Many of these subsidies are hidden, but this one is out in the open, and we can put a dollar figure on it:

The $88 million that might have been paid in 2012 under the regular rate of 4.65 percent but wasn’t — acknowledging that production from thin seams might have been a little lower if producers knew they had to pay the full rate — comes to about 2 percent of the state budget, Muchow said.

The next time your legislator starts talking about fiscal responsibility, you might want to ask him/her why they gave this $88 million to the coal industry last year.

One thought on “The Question of Subsidies

  1. Bill: A little research showed me that in 2011, Jefferson County received a paltry $595,000 from the coal severance tax fund. I do not know how this is calculated, but 27 counties received less than did Jefferson. I am confident that the gaming taxes from HOLLYWOOD CASINO were much more than that. Plus when the property tax collections were redistributed, per the 1983 Recht decision, our proceeds were similarly reduced. Let Joe declare until he is blue in the face that coal is not subsidized. Here in Jefferson, we know better. Danny Lutz

    On Sun, Aug 4, 2013 at 9:32 AM, The Power Line

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