- Associated Press - Sunday, April 19, 2015

CHARLESTON, W.Va. (AP) - The day after West Virginia Republican lawmakers started tax reform talks, coal giant Murray Energy laid off 214 miners with a clear message calling for lower state taxes to unearth coal.

After last week’s layoffs, Murray’s subsidiary condemned the Obama administration and lamented cheaper natural gas reserves. What surprised Gov. Earl Ray Tomblin, though, was that Murray blasted the state coal severance tax as “extremely excessive.”

“That’s really the first time I’ve had anyone say anything about our severance tax,” said Tomblin, a Democrat.

The tax will be under review as the GOP-led Legislature mulls ways to reshape the tax code, said Senate President Bill Cole, R-Mercer.

During the industry’s downturn, the spigot of coal severance cash has slowed considerably. Tomblin expressed concerns about trying to cut an already-shrinking revenue source that helps cover a variety of costs, from education to health care.

A chunk also goes back to county governments. Recently, struggling southern coal counties have laid off law enforcement officers and made other cuts, attributing them at least partly to falling severance money.

“One of the things we’re blessed with is our energy in West Virginia,” Tomblin said. “I can’t imagine right now reducing the taxes.”

Cole called the tax review “the next step” to help coal, after passing bills last session to trim mining regulations and scrap a state alternative energy standard. Tomblin signed both.

A committee on tax reform is underway, and the next session starts in January.

Robert Murray, the company’s namesake and a loud critic of President Obama’s energy policies, just last week bet even bigger on coal. Murray Energy paid $1.4 billion for a controlling interest of Foresight Energy, which mines the thick coal seams in the Illinois Basin. Murray’s West Virginia mines are up north, which has remained a more productive region than the state’s thinning southern seams.

The coal executive also gave state Republicans a big lift last election. His company’s $250,000 donation to a conservative super PAC was one of the biggest all cycle, and helped lift Republicans to their first state legislative majorities in more than eight decades.

At the federal level, Murray and other coal operators say they’ll be crippled by Obama’s climate change pushes, which call for reductions in carbon emissions from coal-fired power plants.

At the state level, the company says coal pays well more than its fair share.

Other than a surtax likely disappearing next year, the coal severance tax hasn’t been raised since 1989. In 1997, mines with thinner seams got a break.

Companies now pay 1, 2 or 5 percent, depending on seam thickness.

Since December 2005, producers have paid 56 cents per ton to cover a worker’s compensation debt, a tax expected to be dropped sometime next year, according to the Department of Revenue.

Combined, coal severance brought in $407.2 million last budget year, including $63.7 million for the debt payback. That’s compared to $451.6 million in 2013 and $531.1 million in 2012.

Similar taxes exist for extracting resources like natural gas, which has boomed and helped prop up the budget during coal’s decline.

It’s hard to compare severance taxes across states because different coal burns at different rates, state Deputy Revenue Secretary Mark Muchow said.

Wyoming charges 3.74 percent underground and 7 percent for surface mining; Kentucky taxes a flat 4.5 percent; Pennsylvania has none; Ohio levies 10 cents per ton, plus reclamation fees; and North Dakota taxes 37.5 cents per ton, according to the West Virginia Department of Revenue.

West Virginia Coal Association President Bill Raney said the state’s severance tax level puts it at a competitive disadvantage. However, he doesn’t want money that goes to counties cut, either.

“I think there’s a balance in there,” Raney said. “I don’t know where that line is.”



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