Charleston – In two days time, and with no input from any expert outside observers on the potential impact of the bill, West Virginia lawmakers have rushed through a bill that cuts $12.5 million in annual state revenue to bail out a bankrupt company in hopes of keeping an uncompetitive coal-fired power plant running.
Meanwhile, a West Virginia University environmental lawyer and economist says he isn't convinced even the $12 million could keep the plant operational.
"It just doesn’t make sense, but I don’t think the Legislature gave it a whole lot of scrutiny,” said James Van Nostrand, director of WVU's Center for Energy and Sustainable Development and professor of law. “First Energy said that’s what we need to keep the coal plant open, then everybody just falls in line and passes it.”
Governor Jim Justice had called a special session following the regular session in March to focus on education reform. Lawmakers have not officially adjourned from that education-focused special session, and Justice, a Republican and coal baron, asked them to also consider House Bill 207 this week, coinciding with interim meetings.
House Bill 207 would exempt "merchant power plants" from the state business and occupation tax. As defined in the bill, the Pleasants Power Station, employing about 160 people in the Pleasants County area, would be the only plant to qualify.
First Energy Solutions, a subsidiary of First Energy Corp., is taking over three of First Energy’s coal-fired plants, including the Pleasants Power Station, and three of its nuclear plants, as demand for thermal coal wanes. First Energy Solutions is also filing for bankruptcy and separating from the parent company.
John Judge, CEO of First Energy Solutions, told lawmakers in a committee meeting Monday that the plant was regularly “on the edge between profitable and not profitable,” and that the plant could close within the year without the tax cut. Lawmakers also heard from Mark Muchow, state deputy revenue secretary, and Jay Powell, Pleasants County Commissioner.
Tuesday morning, in a 77-5 vote, the West Virginia House of Delegates passed House Bill 207, exempting the Pleasants County Power Station from its B&O tax. Eighteen members did not vote, apparently due to absence. The Senate passed it unanimously, 28-0 with 6 absences, Tuesday afternoon.
Lawmakers had to suspend West Virginia constitutional rules in order to pass the bill in speedy fashion, instead of reading it three consecutive times, allowing more time for scrutiny. They said they'd received it for their review on Sunday.
“It feels like log-rolling,” said Delegate Larry Rowe, D- Kanawha, who attempted to amend the bill to last for only five years. That amendment was rejected.
During floor debate Tuesday, Delegate Evan Hansen, D- Monongalia and an environmental scientist, spoke of a subject infrequently mentioned in years past on the coal-producing state’s House floor.
He said he was struck by the lack of discussion about climate change during the debate, and said that for every ton of coal that’s burned, there’s almost two and a half tons of carbon dioxide emitted out of the smokestack.
“Here in West Virginia in 2016, we had those catastrophic floods that damaged a huge amount of property and killed 23 people and that is the type of effect that has been predicted for our region and our state, more rainfall coming down in shorter periods of time, that’s going to lead to more floods, more property damage and more deaths,” he said. "That’s the future that’s in store for us if we don’t take some steps to address climate change, and that’s why I think it’s so important for climate change to be part of these debates.”
He also called for a “just transition” to a more diverse economy.
Hansen said while he appreciated the impact of 160 local jobs, he wanted to put the bill in context, nationally. He referenced a report from Moody’s that said by 2030, coal would make up 11 percent of the country’s electricity generation, and a report by the US Energy Information Administration that found in April, renewables generated more electricity than coal in the United States.
He also said there have been 289 coal-fired power plant closures across the country since 2010, 51 announced since President Donald Trump took office.
He called for a “just transition for the people who have these jobs now, and a just transition for their families and communities, so that we’re not just putting a band-aid on each crisis that comes our way.”
"What this means is there’s an urgent need to diversify the economy, and there’s also an urgent need if we have a just transition, to make sure it’s not just about jobs, but it takes the environment and climate change into effect."
Delegate Marshall Wilson, R- Berkeley, responded by calling man-caused climate change a “mythological pseudo-science.”
In a report released in October 2018, the Intergovernmental Panel on Climate Change said that "(h)uman activities are estimated to have caused approximately 1.0°C of global warming above pre-industrial levels," citing "6,000 scientific references" and the "dedicated contribution of thousands of expert and government reviewers worldwide."
In an interview Tuesday afternoon, Delegate Tony Paynter, R- Wyoming, said that, "Diversification's always a good thing, but we can't hang people out to dry while we’re doing it.
“That’s 160 families," he said. "We’re here to try to help people. We’re not here to put people in the soup lines.
“Diversification’s going to happen eventually. We don’t need to rush it. We don’t need to speed it up.
"We got some good things going on here now but it seems like everything that happens in West Virginia happens at a snail’s pace. Except for people leaving.”
He also pointed to $1.2 million in annual property taxes to Pleasants County, and the continued use of coal. Wyoming County has historically been heavily reliant on that industry.
“We do a lot of strange stuff here at government and a lot of stuff that people scratch their head over but every now and then we get to do something good. For what we spent to save 160 jobs that was money well spent to me.” He said the $12 million would be "absolutely" worth it, even if the plant remains open only a short time.
"It was just kind of a no brainer to me."
Meanwhile, Van Nostrand is skeptical.
"That’s the representation that was made," he said, "but I don’t think First Energy did a great job of providing the numbers to really convince anyone that a $12 million tax break's going to make that much difference."
Judge had said the company needed the tax break before selling their power at auction in August. Van Nostrand noted, though, that the August auction is for power that won't be delivered until 2022.
First Energy Solutions had also told lawmakers cutting the tax would level the playing field.
"They were the outlier," Paynter had said.
Van Nostrand, though, said that the other companies do pay their fair share to the state – the six utility-owned coal-fired plants are regulated by the state Public Service Commission, and pass their B&O tax onto consumers, he said.
Merchant plants, like Pleasants, meanwhile, sell their electricity wholesale. The other merchant plant, Longview, in Monongalia County, negotiated before it opened to provide a payment in lieu of taxes.
Van Nostrand said that the payments to the state, in all three ways, would be “fairly equivalent.”
He added that lawmakers usually speak positively about market forces, “except when coal can’t compete.”
Economists continue to predict long-term declines in the coal industry, while West Virginia state revenue is currently seeing a temporary uptick, in large part due to natural gas pipeline construction and in small part due to an uptick in the exportation of metallurgical coal.
“It’s just 12 and half million dollars that the taxpayers aren’t going to be collecting and I don’t think it makes a whit of difference in terms of whether this plant continues operating," Van Nostrand said. "It’s not enough of a tax break to put this plant back in the money.”
Locally, in the House of Delegates, Delegate Cindy Lavender-Bowe, D-Greenbrier, voted no.
Voting yes, locally, were Delegates Jeffrey Pack, R-Raleigh; Roy Cooper, R-Summers; Brandon Steele, R-Raleigh; Mick Bates, D-Raleigh; Chris Toney, R-Raleigh; Kayla Kessinger, R-Fayette; Tom Fast, R-Fayette; Jordan Hill, R-Nicholas; Tony Paynter, R-Wyoming; and Jeff Campbell, D-Greenbrier.
Delegate Margaret Staggers, D-Fayette, did not vote.
During the 2019 legislative session, lawmakers also approved a bill to cut the severance tax on thermal coal from five percent to three percent over three years, cutting tens of millions from state revenue.
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