Sept. 19–Representatives of West Virginia’s extraction industries gave a message to legislators during interim meetings Tuesday: “Whatever you do, don’t raise severance taxes.”
Literally, the message was a little more complicated than that. But the fact is, West Virginia’s extraction industries are paying their share or more of the tax burden for West Virginia, and increasing severance taxes on coal and oil and gas extraction may have an effect opposite of what would be hoped: In the long run, an increase may reduce revenue to West Virginia and drive high-paying extraction industry jobs out of state.
Taxing the “severance” of oil, natural gas and coal from the ground dates back nearly 100 years with the first coal mining severance tax at 0.4 percent in 1921, reported the Parkersburg News and Sentinel. Today, coal production and processing are taxed at 4.65 percent, with an additional .35 percent for local coal severance taxes.
Other severance tax rates, the Sentinel reports, include:
5 percent on gross receipts at the well-head for oil and natural gas;
5 percent on gross receipts for the extraction of sand, gravel, limestone, sandstone and other minerals;
2.5 percent on the reclamation of coal from coal waste ponds;
1.5 percent on gross receipts for timber, which started in 2016 and will end June 30, 2019.
The coal industry is asking for a decrease in its severance tax — and a careful reduction might be wise to help the coal economy continue its gradual rebound.
Speaking to the joint standing committees of Energy and Finance, West Virginia Coal Association president Bill Raney suggested lowering the severance tax on coal from 5 percent to 2 percent to boost a fragile coal market in West Virginia, reported the Gazette-Mail’s Phil Kabler.
“We’ve got to have that in order to remain competitive,” Raney said. “Without it, we’ll just continue to lose ground.”
And we all know the coal industry lost a lot of ground during the Obama administration.
Anne Blankenship, executive director of the West Virginia Oil and Natural Gas Association, said her industry is not asking for a severance tax decrease, “but we absolutely cannot sustain an increase in the severance tax.”
Not asking for a decrease is a graceful measure by the state’s gas industry. It should. West Virginia’s 5 percent severance tax on gas is significantly higher than its two neighboring — and most competitive — gas-producing states: Ohio with a 1.25 percent tax, and Pennsylvania’s 2.9 percent impact fee.
The state’s extraction industry, particularly natural gas, is driving growth in West Virginia. Making the industry noncompetitive with that of other state’s won’t help West Virginia’s goal of diversifying the economy — and could slow it. The gas industry is bringing investment in chemical manufacturing that can lead to investment in so much else.
As Phil Reale of the West Virginia Independent Oil and Gas Association explained, higher taxes could deter investment in not only natural gas production, but investment in allied chemical and plastics industries.
“There are great things that can happen if we let them happen,” he said.
West Virginia’s got a good thing going with its energy industry — and a strong energy industry will help other industries prosper. Let’s not tax ourselves out of business again.
(c)2018 The Charleston Gazette (Charleston, W.Va.)
Visit The Charleston Gazette (Charleston, W.Va.) at www.wvgazette.com
Distributed by Tribune Content Agency, LLC.