Propping Up Coal at the Taxpayers’ Expense

W._Va._coal_mine_1908By Peter Galuszka

It’s always curious when big business and their bankrolled politicians complain about how the government and its regulations stymie the “magic of the free market.”

Then they turn around and keep protectionist policies that give certain industries big favors such as tax credits.

That’s what the General Assembly has done with a bill that would have reduced tax credits doled out to utilities that burn coal mined in Virginia. The original proposal backed by Gov. Terry McAuliffe was intended to help fill a $2.4 billion gap in the state’s biennial budget.

The idea quickly ran afoul of Dominion Virginia Power and the Virginia Coal & Energy Alliance. The original idea was to scale back tax credits but cap coal tax deductions at $500,000 in any given year. But after the utility and the coal industry lobbyists got involved, a bill to retain the tax credits was quickly approved setting caps at a more generous $7.5 million in a given year.

The credits stem from a law passed in 1999. Its purpose is to make it easier for big utilities like Dominion to choose thermal coal mined in Virginia over product mined elsewhere.

Coal production peaked in the state at 46 million tons. It’s now about 22 million tons or less. Coal employment has likewise dropped sharply over the years.

Much of the coal mined in Southwest Virginia is of high quality and some can be used either to generate electricity or make steel. The problem is its cost. Many of the seams in the state have played out and coal is increasingly thinner and is in  harder to reach areas. The cost of mining it has gone up.

For years coal maintained a price advantage over alternatives such as natural gas but thanks to hydraulic fracturing, that is no longer the case. Utilities like Dominion have been converted facilities to gas or are building new plants that use gas. Its last coal-related plant is a hybrid near St. Paul.

What’s causing this shift away from coal? High production costs and cheaper alternatives. Out West, in the Powder River Basin of Wyoming and Montana, coal is cheap and easy to mine. It does well. In other words, the free market is affecting  the declining Virginia coal industry  yet the General Assembly wants to prop it up at the expense of taxpayers and the budget.

By the way, Dominion and coal giant Alpha Natural Resources in Bristol are among the biggest political donors in the state.

There are currently no comments highlighted.

12 responses to “Propping Up Coal at the Taxpayers’ Expense

  1. Our elected officials refuse to approve fees that would bring the basic government function of testing and approving weights and measures used in the marketplace. We’ve changed the rules and cut the budget over more than a decade so that instead of checking these devices on an annual basis, years pass between inspections. By now, most sellers are aware that inspection is rare, but most consumers are unaware. Consumers can’t tell if we get a little less gasoline or ham than we’re supposed to. At some point consumers are going to realize that the gas dispensers, scales at grocery stores, etc. are not checked regularly and their design today makes it easier than ever for shady folks to “adjust” them. Trust in our marketplace will suffer. People from other states may decide to avoid our marketplace feeling they cannot be assured of fair treatment here.

    So we consistently ignore basic government functions, refusing to raise the funding. On the other hand, we approve handouts to big businesses that cost taxpayers many times more than weights and measures. We’re ignoring the need to diversify the economy in coal country, continuing to pour millions of dollars into the industry we know is not going to add jobs or better support workers.

    ‘Further, the same people who insist on giving so much money to the coal industry steadfastly refuse to provide public support to the nascent renewable industry or energy efficiency. There is something very wrong with Virginia’s priorities when we ignore basic government functions and refuse to support growing industries while dumping millions to the coal industry, which will not grow, which is damaging our environment, and costs more every year.

  2. Once you realize that Virginia’s elected officials are unaccountable crooks everything starts to make sense. The “free market” is the last thing that The Imperial Clown Show in Richmond wants. From Omega Protein to Dominion Power , the clowns in the General Assembly curry no favor by letting the “free market” work. Somewhat paradoxically the Democrats in our state government are a whole lot closer to “free market” thinkers than the supposedly small-government-loving Republicans. It’s the Democrats who try to limit the perpetual company and industry tax breaks (Petersen). It the Democrats who try to implement checks and balances by allowing Virginia’s governor to stand for a second consecutive term (Surovell).

    In fact, it is generally Northern Virginia Democrats who seem to be serious about limited government while it’s souther Virginia Republicans who pretend to support the free market but actually push crony capitalism at every turn.

  3. drones and license plate readers and police seizure without conviction … all to protect us from those radicalized Muslims hiding behind every bush and shrub waiting to behead the unwary….

    dunno what put a bee in the Tea Party’s bonnet… they seem to have been just fine with Virginia until now.. and good gawd maggie mcgee … they’ve teamed up with the ACLU to oppose these “anti-terror” measures…

    as they say – if you ain’t done nothing wrong – you ain’t got anything to worry about!

  4. “It’s always curious when big business and their bankrolled politicians complain about how the government and its regulations stymie the ‘magic of the free market.’”

    Really? Big business talks about the “magic of the market?” I didn’t notice. The last time I checked, U.S. big business had pretty much gone in whole hog for crony capitalism, working the political system in order to gain competitive economic advantage. The charge may be more a more accurate descriptor of politicians who talk about the free market on the campaign trail then practice something very different when they get in office.

  5. According to Peter:

    Tax breaks for coal — bad.
    Tax breaks for renewable energy — good.

    How about no tax breaks for anybody? How about creating a level playing field?

    • Fairfax County is trying to push through an independent living plan (private construction on county land) without adequate review, but with replacing playing fields with a big storm water pond, rather than the underground tanks it normally requires, so some investors can get their tax credits in 2015. Ergo, the GA and the BoS operate pretty much the same.

      Few big businesses believe in a free market. That’s too disruptive.

      I like Jim’s idea – no energy tax credits for renewables or for coal.

  6. I agree. No tax breaks for anyone so there is a level playing field. Don’t think our current system would allow it but it would be a lot more fair.

  7. Jim,
    I agree with you on Big Business and crony capitalism. In a pure form of capitalism, renewables would have to compete with nukes and coal. But those both have had tons of bennies for years. Also with coal, no one bothers to tally the other costs, such as ruined health, poverty and environmental damage rampant int he coalfields.

    • Peter is right. The external costs of pollution and environmental destruction are never factored into the price of anything. Parts of West Virginia look like a war zone from surface mining of coal.

      • that’s correct. West Va is a mess but so is Virginia – but you can’t see it because it’s airborne deposition of mercury, sulfur and particulate matter … that affects the health of children, the elderly, those with compromised immune systems – and pregnant women.

        billions of dollars of “external costs” are put on the backs of others the vulnerable so that the rest of us can get “cheap” (to us) electricity and nary a whimper from those who wail the loudest about the “cost” of wind/solar.

        and DonR – I’m proud of you!

  8. And as Virginia considered deregulation and building more generation in Virginia, the legislature specifically forbade the researchers from considering ANY negative externalities. Thus every decision made has been done on a tilted playing field – for generations.

Leave a Reply