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As coal value declines, W.Va. loses tax revenue

WHEELING, W.Va. — The assessed value of West Virginia’s coal reserves and coal mining equipment dropped a combined $1.1 billion between the 2013 and 2015 tax years, costing the state about $26 million in property tax revenue over that span.

In those two years, the value of oil and natural gas underlying the state’s hills and valleys has increased from $4.1 billion to $4.7 billion, but the resulting revenue – $14 million – hasn’t been enough to make up for losses tied to the coal industry’s decline, according to a presentation from Property Tax Division Director Jeff Amburgey during a meeting of the legislature’s joint committees on tax reform and energy Monday at the state Capitol.

Amburgey told lawmakers he expects that trend to continue amid a rash of bankruptcy filings by coal companies operating in the state – most notably Patriot Coal and Alpha Natural Resources – this year. The value of coal machinery in the state, making up nearly 6 percent of the state’s entire property tax base, has fallen from $4.8 billion in 2013 to $4.2 billion for 2015.


“We’ve seen a number of mine closures. Some companies have moved mining equipment out of state, so I would expect we would see that number drop below $4 billion,” Amburgey said. “It’s too soon to tell.”

Meanwhile, the value of coal reserves, which account for about 3 percent of property taxes collected, has declined from $2.6 billion in 2013 to $2.1 billion in 2015 – its lowest since 2011.

And as natural gas prices continue to decline, it may be a few years before property owners – who are assessed on the minerals they own regardless of whether production is occurring – see that reflected on their property tax bills, according to Amburgey. For example, assessments for tax year 2015 are based on property owned on July 1, 2014, and calculated by averaging data from calendar years 2011 through 2013.

“When price goes up or down, there’s always a lag in the values,” Amburgey said.

Sen. Art Kirkendoll, D-Logan, asked whether something could be done to decrease taxes for coal companies who have idled their equipment. This, he said, may encourage operators to keep their machinery in the state in case demand for coal rebounds.

“We can have diversification of our economy, but coal’s still going to have a major impact on what we do, and we’ve got to be prepared,” he said.

Amburgey said the Tax Department is working with the West Virginia Coal Association to come up with a different method of assessing idled equipment.

Delegate Woody Ireland, R-Ritchie, pointed out that taxation of minerals and mining equipment is based largely on self-reporting by companies, and asked what methods are in place to verify accuracy.

“They are audited by our auditing division,” Amburgey said. “We do a cross-check with the (Department of Environmental Protection) to see the production that’s been reported to them matches what’s been reported to us.”

The Joint Committee on Tax Reform is slated to meet again tomorrow at the Capitol to discuss taxes on alcohol and tobacco, as well as gambling taxes and subsidies.

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