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Report: Coal costs W.Va. budget more than it pays

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CHARLESTON, W.Va. -- While coal mining provides West Virginia valuable jobs and tax revenue, the industry actually costs the state government budget more than it pays, according to a report released Tuesday.

Last year, the coal industry cost the state budget $97.5 million more than it paid in taxes and other revenues, according to the report released by the Morgantown consulting firm Downstream Strategies and the West Virginia Center for Budget and Policy.

Government pays out huge sums each year for agencies that regulate coal, tax breaks for mining companies, and coal truck damage to state roads and bridges.

"While the coal industry provides significant benefits for the West Virginia budget, the industry also imposes substantial costs that impacted the budget in 2009 and that have accumulated from past coal industry activity," said lead report author Rory McIlmoil of Downstream Strategies. "These are costs that, lacking a change in state policy, will be paid by the citizens of West Virginia for decades to come."

The report was paid for in part by the Sierra Club and the Natural Resources Defense Council, environmental groups that oppose mountaintop removal and generally favor switching to cleaner forms of energy than coal.

Coal industry officials were still examining the report, but complained to The Associated Press that "anti-coal extremist groups" prepared the study.

"We are still reading it," West Virginia Coal Association President Bill Raney told the Gazette. "But we think there is a big understatement in revenues in this thing."

McIlmoil and other authors acknowledged their numbers are estimates that involve "an inherent degree of uncertainty," but also described their report as a broader and more inclusive analysis than previous industry-supported reports.

"Coal plays a significant role in West Virginia's economy, contributing hundreds of millions of dollars in state and local revenue and providing well-paying jobs to tens of thousands of West Virginians," the report said. "But the size of the coal economy, while substantial, is not as considerable as previous accounts suggest. Further, such accounts have only presented coal's benefits; our estimates provide an initial accounting of both benefits and costs.

"As estimated in this report, the industry itself -- including direct and indirect employers -- actually costs West Virginia state taxpayers more than it provides," the report said. "Such an accounting is important, for projected declines in production, should they prove accurate, will further diminish coal's contribution to state revenues, while the negative impacts resulting from coal industry activity will result in ongoing costs to the state and its citizens."

Among the report's findings were that the coal industry in 2009 paid $307.3 million in severance taxes, corporate net income tax, business franchise tax and other taxes. But the state spent $113.7 million to support units of government that regulate mining and for the repair of the state's coal-haul roads. So, the report concluded that the industry in this respect provided a net benefit to the state budget of nearly $194 million.

But the state provides a variety of a tax credits and subsidies that amounted to nearly $174 million in 2009 -- all of which show up in the report as "expenditures," or costs to the state budget of the industry.

Looking into the future, the "legacy costs" of coal could pose the state major problems, according to the report.

"External costs resulting from coal industry activity, including the costs to human health, for repairing damage to personal property, and in the value of lost economic opportunities resulting from the loss of clean water and timber resources, for instance, were not considered in this report," the report said. "However, they all represent real costs to society, and should be considered in any full accounting of the benefits and costs of the coal industry."

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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