West Virginia Steam Coal Severance Tax Decrease

In the closing moments of the recent legislative session at the West Virginia Capitol, Gov. Jim Justice signed a bill that will decrease severance tax on thermal (steam) coal from 5% to 3%.  This decrease will be implemented over the next three years and works out to about 40 cents per ton.  Additionally, this savings will yield an estimated $60 million in year three of the implementation.

However, this bill was not introduced solely to save coal operators tax; it was intended to save valuable coal jobs within West Virginia’s coalfield communities.  While many of the eastern United States’ power plants have migrated to natural gas for their power generation, foreign countries (especially India) still require steam coal to produce electrical needs for their growing population.  This coal is being mined in the Appalachian region and the passage of this new law will allow West Virginia producers to remain competitive with our neighboring states.

Steam coal severance taxes currently generate approximately 4.5% of the state’s budget and was met by opposition from both parties during a time when legislators were looking at each branch of government for budget cuts to balance the budget.  However, Governor Justice countered with the following statement to his opponents, “If you look at where prices are today, it equates to about 40 cents a ton, so at the end of the day, in a lot of ways, it’s semi-insignificant to everything except assuring that we’re going to have these jobs.”

We’re here to help you understand the effect this bill could have on your organization, so you can make well-informed decisions for the year ahead. If you’d like to explore how our energy practice could help your organization prepare for what’s next, please give us a call today.