Published: April 25, 2006 10:27 pm         

Coal severance tax hits record $280 million in W.Va.

West Virginia’s coal severance tax soared to a record $280 million last year, a number that one industry leader says is “way out of kilter” when put alongside other coal-producing states.

That tax dates back to the 1970s, when it was known as the business-and-occupation tax, but acquired its new definition two decades ago.

Bill Raney, head of the West Virginia Coal Association, said the industry remains the “bedrock” one in West Virginia, one that provides counties and municipalities with some operating capital.

Under a distribution formula, 7 percent of the collections are disbursed quarterly to the 55 county governments and 234 incorporated municipalities.

Raney hailed the record dollars yielded through the severance tax as “a compliment to the men and women working in the coal industry,” but said West Virginia gets far more from coal producers than other states.

“It’s way out of kilter as it regards other coal-producing states,” he said in an interview.

“We’re well above them in terms of taxation at the state level.”

Severance taxes are at the mercy of the market, since the state gets 5 percent of the selling price.

Raney says his biggest concern is whether West Virginia can continue to get coal investments in the face of a record severance tax.

“We’ve got to make some judgments whether or not we are competitive enough to get that investment and have the infrastructure and all those things that are necessary to open a mine,” he said.

“The guys who do that tell me it takes about $10 million to open the smallest of mines today. It’s a huge investment, one the state desperately needs.”

Raney said he hopes the state will rally around the industry and recognize that “coal is truly the foundation of the economy here.”

“We need to look at all aspects of it,” he said of the industry.

As foreign oil producers jacked the price of oil to $75 per barrel last week and the gas prices rose at the pumps, Raney said officials need to accelerate the push for liquefaction and gasification of coal in West Virginia.

“When you do value added manufacturing of it, and creating products for greater value, such as what we’re doing with electricity and what we’ve done with steel, making liquids and gas out of it, it becomes very, very important and very, very timely,” the coal leader said.

“Everything needs to be looked at to see where we can nurture that and use coal as the foundation for the economy.”

Raney pointed out that eight counties, including their local municipalities, landed more than $1 million of the tax, while five other counties got more than $500,000. Thirty-one counties received at least $100,000.

Boone County, the state’s top producer, raked in the most of the severance tax — a whopping $4.2 million. The biggest increase came in McDowell County, from just below $300,000 in 2004 to more than $800,000 a year ago.

The overall tax totals don’t include the additional severance of 56 cents per ton that Gov. Joe Manchin steered through the Legislature last year as a means of easing the workers’ compensation debt.

Three-fourths of the severance tax money is divvied among coal-producing counties, based on levels of production. Each municipality gets a share of the remaining one-fourth, based on population. And each county is earmarked for a share based on the unincorporated population.

Some jurisdictions fare well, even though they are in the coal business.

Huntington, for instance, took in $165,000 as its share of the $230,000 that went to the non-coal producing Cabell County.

Wood County, likewise, is bereft of coal production, but it got $282,000, and Parkersburg received $106,000.

Among other non-coal counties were Berkeley, $232,000; Putnam, $161,000; and Ohio, $150,000.

Charleston was accorded $171,233, leading the state’s four largest cities getting at least $100,000. No strings are attached to the money, meaning local governments may spend it on construction and maintenance, ambulance service, trash pickup and special needs.

“We account for about 10 percent of the state’s budget,” Raney said.

“People need to recognize the significance of that and make sure we do everything we can to benefit everyone.”

— E-mail:

mannix@register-herald.com