Monday, November 16, 2015

Some states fear Clean Power Plan will cost them millions in revenue from severance taxes

Some coal states are concerned that the Environmental Protection Agency's Clean Power Plan will cost them much-needed severance taxes that many communities rely on to fund services such as schools or local government agencies, Sophie Quinton reports for Stateline. "In 2013, Montana’s tax revenue from severance taxes was nearly 12 percent. In West Virginia it was 13 percent and in Wyoming it was 39 percent," according to a Stateline analysis. The regulations take effect in December, but could be blocked by court action.

The rules could spell bad news for some small towns, like Colstrip, Mont., whose coal "operations contributed 4.5 percent of all state tax revenue and $104 million in state and local taxes," according to a 2010 University of Montana study, Quinton writes. "The electricity-generating plants consume almost all the coal mined at the Rosebud Mine, the second largest coal mine in Montana. When the mine removes—or 'severs'—coal from the earth, the mining company pays the state a severance tax on the value of the coal. Some of the money is invested into state trust funds, and some goes to support statewide services, such as public schools." (Stateline map; for an interactive version click here)
State Rep. Duane Ankney, a Republican who represents Colstrip, said the regulations would have a major financial impact on the state. He told Quinton, “We’re talking a $700 million to $800 million fiscal impact to the state, county and local governments.” Puget Sound Energy, a part-owner of the Colstrip operation, already wants to close part of it, a threat to the town of 2,300.

In West Virginia last month, "Democratic Gov. Earl Ray Tomblin announced a 4 percent, across-the-board budget cut to compensate for a deficit driven by a $190 million drop in severance tax collections," Quinton notes. "Wyoming’s Republican Gov. Matt Mead announced $200 million in budget cuts, citing falling energy prices."

"The U.S. Energy Information Administration expects coal-fired power plants to continue to shut down and for very few new coal-fired plants to replace them, even without the Clean Power Plan," Quinton reports. "That’s a big deal, because more than 90 percent of the coal mined in the U.S. is burned to produce electricity, according to the EIA." (Read more)

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