End the Coalfield Boondoggle

Alpha Natural Resources mine facility

By Peter Galuszka

The General Assembly’s auditing watchdog has recommended the elimination of  two coal tax credits that have been a bonanza to Virginia coal companies worth $315 million from 2010 to 2018 but have created only 10 jobs.

The report by the Joint Legislative and Audit and Review Commission (JLARC) studied 16 different tax credits to boost the state’s economy but recommended  only eliminating the ones involving coal production.

Those credits involve the Coalfield Employment Enhancement Tax Credit, formed in 1995, and the Production Incentive Tax Credit, formed in 1986 to help with electricity generation.

Virginia’s coal production peaked in 1990 and has been declining since. In 2000, for instance, it had been 33 million short tons but in 2019, it had dropped to 12 million short tons.

Steam coal used for electricity generation has been unable to stay competitive with natural gas, which was unleashed in a great flood about 10 years ago by hydraulic fracturing drilling operations in the Appalachians.

Coal has also come under strong attack for producing carbon pollution that leads to global warming, the results of which can be seen in the unprecedented forest fires on the U.S. West Coast.

Virginia’s coal-fired power plants have dropped significantly and the remaining ones should be closed in coming years. None burns state coal, according to the Virginia Mercury.

Virginia does have high grade metallurgical coal for steel production but most of that is shipped overseas.

The two tax credits have long been problematic. JLARC reports: “Local economic development staff rate the grants as useful, but they appear to have little effect on employment, income, and other economic indicators, according to statistical analysis and other research.”

Both were rated “negligible” compared to the economic impact of other tax credits involving the tobacco omission and public housing.

One unanswered question is home much Virginia’s coal companies have used the tax credit largesse to prop up failing firms.

Consider the plight of Alpha Natural Resources, formerly based in Bristol. Formed in 2002, the firm had operations in Virginia, other parts of Appalachia and Wyoming that produced both steam and metallurgical coal.

In 2011, in swooped in and bought out Richmond-based Massey Energy, which had stepped into controversy with lax safety standards and bad management. A 2010 deep mine blast in Montcoal, W.Va. killed 29 miners, the worst accident in 40 years in the U.S. Massey went bust and its chief executive, Donald L. Blankenship, was convicted of a misdemeanor in federal court and spent a year in prison.

Alpha coveted Massey vast reserves of metallurgical coal and bought the firm for $7.1 billion in 2011. It had a total of 150 mines. It was riding so high that it built a shining new headquarters near Bristol and was lauded in a gushy cover story in Virginia Business magazine.

Then, it hit big bumps. Soon, it laid off 800 workers and filed for bankruptcy in 2015. It also unloaded its headquarters for $28 million. It emerged from bankruptcy in 2016 as a private company.

In 2018, it was bought by Contura Energy of Kingsport, Tenn. One question is how much Alpha received in Virginia coal tax credits and how many jobs it created during this period.

On this blog, there have been many complaints about tax breaks and credits being awarded to renewable energy companies, some by lobbyists with interests in promoting fossil fuel. Here is a clear example of fossil fuel getting breaks that, according to JLARC, did not amount to much.