Why can’t Virginia quit coal?

Virginia legislator celebrates millions in tax breaks in a futile effort to save coal jobs

Today on Facebook, Virginia state Senator Ben Chafin posted this update:

As the Roanoke Times reports, the Senate voted 33–7 to keep a series of coalfield tax credits in place. The credits, which go to tax breaks for coal mine operators and power utilities that purchase coal, were originally put in place in 1998 to help slow the decline of the coal industry in Virginia. Since then, the State has credited the industry $610 million dollars, even as 251 mines closed and jobs decreased from 11,100 to 2,800 today.

In 2012, a Joint Legislative Audit and Review Committee study stated that coal tax credits appeared unlikely to achieve its goal, stating that the credits “may not be effectively promoting coal production and employment because changes in coal mining appear unaffected by the credits. This was following $31.2 million dollars in credits during 2008, a year in which six corporations claimed over one million in credits each. The corporations were not named.

Figuring out the actual cost and impacts of this program seems like and effort in futility. It’s important to note that we’re talking about two sets of credits: the Virginia Coal Employment and Production Incentive Tax Credit, granted to the power companies for buying coal mined in Virginia, and the Coalfield employment enhancement tax credit, given to the mine operators themselves.

The actual year to-year costs of these credits and the cost of the bill just passed is a bit hard to understand, so bear with me for a paragraph while I explain. The Employment and Production credits (to the utilities) varies, as 2013 saw almost $60 million in total credits claimed due to carryovers from the previous two years, when none were claimed. The financial impact statement of the bill that passed today, Senate Bill 44, states that in 2014 and 2015, the average cost of the credits was $9.3 million. SB44 will cap these to 7.5 million, supposedly resulting in a positive net ‘savings’ to the state for the next few years. However, one of the provisions of the Employment and Production credit, that was set to expire, allowed “persons,” AKA corporations, to redeem tax credits that “exceed the person’s tax liability.” Apparently the provision in question allowed companies to carryover these credits for 10 years or until they were used up, and this sunset was written into the Governor’s budget. Extending this provision would actually has a negative impact of almost $8 million on the State’s budget through 2022. And the coalfield credit (to the mines), which the Senate also extended in SB44, would cost the State $34.9 million in the 2021–22 tax years. (The credits cannot be claimed until 3 years after they are earned.)

So in summary, the Senate today voted to grant $44.2 million in tax breaks to coal companies and utilities in a program that doesn’t work, to save 2,800 jobs that will most likely be lost anyways.

It is worth mentioning that the Coalfield Economic Development Authority (VCEDA), a network of technology and business parks spread out over the western part of the state, receives its funding through a portion of these coal credits, and today’s vote will provide $5.5 million in additional funds to the program. One could argue however, that the citizens of western Virginia would be better off if lawmakers increased the amount of funds that this program receives instead of providing extended breaks to the coal companies directly.

One such company benefiting from these credits is Alpha Natural Resources. Alpha, which purchased Massey Energy in 2011 following the Upper Big Branch mine explosion, then laid off 4000 employees and filed bankruptcy last year with $4.2 billion in debt, some $3 billion of which owed to Citigroup and JP Morgan for the Massey acquisition. Last month, the Justice Department filed an objection against Alpha’s plan to pay $11.9 million in executive performance bonuses. This week, before a House subcommittee, an Alpha representative said of the tax credits, “this is absolutely key to our survival, and we’re in a survival mode.”

According to the Virginia Public Access Project, which tracks Virginia political donations back to 2003, Alpha Natural Resources spent over $2.2 million in political contributions to Virginia lawmakers, including $200,000 in contributions during the 2015 Virginia election cycle. Sen. Chafin himself has received $12,500 from Alpha over the past two years, most recently a $5000 payment last April.

When I saw the post on Sen. Chafin’s wall this morning I commented “what about passing the #RGGI and pulling in some of the solar jobs like NC, WV and MD have done, instead of propping up an industry that continues to destroy our mountains and pollute our waterways?” It was perhaps no surprise that my comment was deleted when I checked this evening, my only wonder if Sen. Chafin read it himself or if it was deleted by an intern or staff member. It seems a bit callous of me to disregard the economic plight of those affected by coal jobs in the region, but the fact of the matter is that coal consumption fell worldwide last year by the biggest drop ever. It’s not the result of some liberal plot by McAuliffe of Obama and environmentalists. The so-called ‘war on coal’ has already been won, and the sooner that we start redirecting taxpayer kickbacks from a handful of corporations in a dead industry to those that provide jobs in clean power or other direct economic incentives, the better off we’ll be. The people of coal country must realize that coal credits have failed and that there needs to be a new plan to provide for the well-being and health of the citizens of Virginia.

[Nay votes on SB44: Ebbin, Favola, Howell, Locke, McEachin, McPike, Surovell]

[Power for the People VA regularly has great news about the sausage-making of Virginia energy politics that is well worth checking out.]