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.

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35 responses to “End the Coalfield Boondoggle

  1. Recently, wearing my “Senior Fellow for Tax Policy” hat, I was asked to sign our organization onto a statement to Congress complaining about the tax breaks offered to wind projects. I did indeed decline because there are so many tax preferences, for so many different forms of energy production, that the real position we should be taking is to eliminate them all, to let cost and other factors dictate the market. I’m sure you will join me in that opinion, Peter…No? Not ready to kill the renewable tax breaks along with these (admittedly obsolete) coal tax preferences?

    “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.”

    Absolutely hilarious and false. But if true, they are burning it in ever increasing amounts across the Pacific, so get ready….But no, California is dry, and for the last few decades has abandoned proper fire control forest management. My wife recalls teaching Virginia fourth graders about the natural life cycle of a forest in the 8os, and fire was part of that — and a key part. California is paying a price for lousy forest management, and for allowing so much development up in them thar hills. Dry hot weather has been the standard there for a long, long time.

    One key point: To the extent these preferences lowered utility costs over the years, we benefited. Taxes are a pass-thru on the bill of regulated utilities, paid 100% by the ratepayers. But coal is passing away as a utility fuel so that matters less now.

    • sorta dueling blog posts…but different… perspectives… interesting..

      re: western fires

      a large percentage of the forests out west are Federal, just fyi.

      dryer and dryer weather has been the norm over the last few decades – true – Lake Mead and other big lakes are down significantly

      However, the skeptics think the climate scientists have way overestimated the effect of carbon but it’s also quite possible, they way underestimated it and fossil fuels were already causing changes in the climate at higher rates than they estimated – and as a result – we see decade-long droughts in the west.

      Too late now. This is probably just the beginning of even worse to come…. both mountains and coasts.

      on the building of structures where they should not be.

      Yes… both in the mountains as well as along the coasts and in both cases both the Federal and State government subsidizes and supports it.

  2. Are Oregon, Washington and Idaho climates naturally dry? Never been there. Have you? Absolutely and hilariously yours.

    • Seriously? No desert in Eastern Oregon? You get across the mountains from the coast in those states, and yes, the rainfall is far, far lower. No question this is a drier year, but are they having the same problems in Canada, or does Canada do forest management differently? They probably do have fewer moron arsonists, who are setting at least some of these.

      Oregon: https://en.wikipedia.org/wiki/Climate_of_Oregon#/media/File:OR_trewartha.svg

      Cali Fires: https://www.nationalreview.com/2020/09/california-forest-fires-taxes-homelessness-same-old-fall-problems/#slide-1

      I lived out there in the 60s. Fire prevention was an obsession, a constant message. Not a new issue, not something “created” by minuscule changes in average surface temps. But if fear of COVID doesn’t get you votes, go for fear of Climate Catastrophe.

      • Eastern Oregon is rain shadow country as is Nevada and Arizona.

        Has far less of the types and density of forests that are on the western slopes of the mountains.

        But the fires are being started by dry lightening… not campers.

        No or few fires in Canada – so that is a point.

        We were out west during the year Yellowstone burned and the Federal and State campgrounds had strict no-campfire rules and if you were a smoker – we were told ONLY in the car. And they would toss you in a heartbeat if they caught you breaking the rules.

    • Depends on which side of Washington State you are standing Peter. On one side of the Cascades it’s a lush rain forest on the other side it’s a desert climate. That statement is also true for Oregon and Idaho.

      I’m going to guess you’ve never been to Washington State.

    • Yes. The coast is wet, real wet, like 265 days per year of rain wet. The “woods” are rain forests, just not tropical. People wash their cars in the rain because you don’t waste a sunny day on washing a car.

      About 1/3 way across those states you go up the Cascades and over them to Gobi desert like dry, flat lands, then you start going up into the Rockies.

      Go. Wait until the fires die, then go. Obviously the summer is best. Drive there. Along the way, see the Tetons and be struck dumb.

  3. Seriously? My parents were stationed at Bremerton before I was born. They recollected how many times their car windshield wipers wore out. You were in the high desert of California? Nice try.

  4. Many of the fires are in the moist cascades near the coast. Not exactly Edwards afb

  5. Turning aside from the climate debate, these tax breaks certainly appear now to be indefensible. Unless those 10 new employees were all CEOs that is…..

  6. Peter, our second CA tour was Norton AFB and the fires I clearly remember those years were in the San Bernadino Mountains, terrain very similar to what is burning now. Larry, I do not dispute this is an unusually bad year, and apparently they’ve had more than typical dry lightning. But worse than in the past due to “climate change?” There is no evidence of that. Probably last time it was this bad you didn’t have that much population in those areas (or it wasn’t a presidential election year.)

    In two years that map might be reversed, with the west coast getting more rain and us in drought. It happens.

    Yes, I would expect another run at those tax credits. If I had a fat fee from a paying client I’d draft the substitute to take all the energy tax breaks out of the code….Not holding my breath. The solar guys in particular have a lot of muscle in that arena right now.

    • In two years that map might be reversed, with the west coast getting more rain and us in drought. It happens.

      It sure does. Drought cycles predated the industrial revolution. Maps here of Historic Droughts give a few examples. The text looks back further.

      “…studies have suggested that the historic droughts of the 1930s and 1950s may not have been as long or bad as droughts in prehistoric times. The 1930s drought was longer and more extensive than any drought in the last 300 years, but around A.D. 200 some parts of North America experienced drought conditions for several decades.

      “Paleoclimatic data have also suggested that even longer cycles can change regions from deserts to plains to forests and back over the course of centuries. These 200- and 700-year long cycles go back to the Little Ice Age and may be effected by solar activity or conditions in the ocean and atmosphere.”

  7. You all are trying to change the subject. The point is the goodies being handed to coal companies. Any ideas on that?

    • “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.”

      Not even slightly Peter, you’re the one that introduced coal/global warming and forest fires.

      How about as Steve said, we rescind all tax credits for energy and see where the chips land. After all, you researched so much about oil you should know that in the beginning there were no breaks and you went belly up on your own accord.

    • Sorry for the diversion, but we needed to take climate change out of the discussion.

      I agree with Steve Haner that we should “let cost and other factors dictate the market.”

      For the coal tax credits, the JLARC analyst’s statement that “The remaining coal-fired plant, the Dominion-owned Virginia City Hybrid Energy Center in Wise County, gets roughly 99 percent of the coal it uses from waste or gob coal at a nearby abandoned mine, rather than recently mined coal…” ought to make this an easy choice.

  8. Baconator with extra cheese

    Goodies shouldn’t be handed out to any companies… period.

  9. Matt Adams.do this. Look at the sky. It is supposed to be crystal blue. But it is a dingy White. Make the connection.
    Cjbova. I have writing about the Virginia City hybrid plant for years, including BR.

    • Peter,

      The sky isn’t supposed to be crystal blue, there are items called clouds they protect you from the harmful UV rays given off by the sun.

      That is also not the connection you made, how very disingenuous of you. The connection you tried to concoct was that of the forest fires raging in the pacific region and climate change.

      Instead of actually understanding the prevalence of the forest fires is from other conditions.

      Also, another pro tip. Merely because your parents lived somewhere post WWII that doesn’t transfers that experience to you, someone who’ve never been. Washington State is two very distinct climates (I know, I’ve been there). I was there when you can find temperatures that allow for frost to occur in July.

  10. I did not realize we had 2 coal posts, my comments are on the other one. Met grade coal is used to make steel, and perhaps could be considered a clean, non-combustion coal use…not sure – had not thought about that before. In any case, met grade coal is *not* what global warming is all about.

    So there could be some merit in the special met coal focus/support, pending further review.

    Another thing we want to have happen/encourage is clean up of old sites as much as possible.

  11. TBill. You are right. I spent two years writing a book about all of this. It came out in 2012. St. Martin’s Press. Part of Macmillan. New York. It was later republished by West Virginia University Press.

  12. As usual with BAcon’s rebellion, we are getting down in the weeds with diversion. Who cares where Bremerton is? What about coal credits? What’s with you people?

    • Coal credits? Okay. I agree with Steve Haner that we should do away with ALL tax credits and let cost and other factors dictate the market.

      It is funny, though, how YOU bring up an issue, YOU make a comment about it, and then when someone responds to your comment you accuse them of “getting down in the weeds”. If want people to stay out of the the weeds you should probably avoid sowing weed seeds.

    • As I stated quite some time back, these tax credits are indefensible.

  13. re: droughts

    then there is this:

    ” Two Antarctic glaciers that have long kept scientists awake at night are breaking free from the restraints that have hemmed them in, increasing the threat of large-scale sea-level rise.

    Located along the coast of the Amundsen Sea in West Antarctica, the enormous Pine Island and Thwaites glaciers already contribute around 5 percent of global sea-level rise. The survival of Thwaites has been deemed so critical that the United States and Britain have launched a targeted multimillion-dollar research mission to the glacier. The loss of the glacier could trigger the broader collapse of the West Antarctic ice sheet, which contains enough ice to eventually raise seas by about 10 feet.”

  14. In 2017, there were all of nine fully integrated steel mills in the U.S., down from 13 in 2000. They produce about 31 percent of the steel used in the U.S. About 30 years ago, big integrated mills started being closed. Replacing them were rolling mills that made steel out of scrap. The leading firms were Nucor and Steel Dynamics.

  15. Coal. Carbon. C12. The ratio of C12 to C13 (mostly) and C14 in the atmosphere is changing and has been rising faster in the last 150 years. C12 gets there in one major way and one major way only, burning old fuels, hydrocarbons. It’s the smoking gun.

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