Decline of coal severance taxes hurting local economies in Central Appalachia

Central Appalachian communities that have seen a decrease in coal production and mine closings—blamed on tougher environmental regulations and cheaper natural gas—are also seeing a reduction of severance taxes from coal companies, creating financial woes for many towns and counties, Margaret Newkirk, Tim Loh and Mario Parker report for Bloomberg.

In Eastern Kentucky’s Letcher County, "emergency response time for sheriff’s deputies averages an hour, up from 30 minutes a year ago," reports Bloomberg. "Martin County, also in Eastern Kentucky, couldn’t afford to open its public swimming pool this summer. West Virginia’s Boone County, once the richest in the state, is considering ending free garbage pickup." Kelly Callaham, judge-executive of Martin County, said the county budget dropped from $8.5 million to $7 million over the past three years. Callahan told Bloomberg, “It’s just been devastating to us. You take a million and a half out of a budget that size, it’s a disaster.” (Bloomberg graphic)

That's the same tune many towns and counties are singing. "The Appalachian Regional Commission, a federal-state economic development organization, classifies 93 of 420 counties as distressed," reports Bloomberg. "Many of them are in Central Appalachia, which straddles Kentucky, Tennessee, Virginia and West Virginia."

"The region has been mined for two centuries, and the cheapest and best coal has been dug up," reports Bloomberg. "The remaining seams are lower quality and more expensive to mine. Many utilities have replaced Appalachian coal with cheaper fuel from Illinois and the Powder River basin in Wyoming and Montana, or switched to burning natural gas. Coal’s share of electricity generation in the U.S. will fall to 35 percent this year, from 50 percent a decade ago, according to the U.S. Energy Information Administration. Coal production is expected to fall to less than 914 million tons, the lowest in 29 years. The number of active pits in the U.S. has plunged 39 percent from the end of 2005 through June 2015."

Loss of severance taxes, which "mining companies pay into state coffers based on the value of coal tonnage taken from the earth," has been evident, with Kentucky counties getting $23.4 million in 2015, down from $62 million five years ago, Bloomberg reports. Boone County received $2 million this year, down from $6 million in 2011. Letcher County’s quarterly severance checks dropped to $200,000, from about $700,000 two years ago, forcing the sheriff’s office to lay off employees so it could make its pension payments. Jim Ward, the county’s top official, told Bloomberg, “You take all of that money out of our budgets, and what do you expect us to do?”

Things have gotten so bad that about a dozen of these towns and counties—which are mostly pro Republican and anti President Obama—have asked Republican leaders to get behind the president's Power + Plan to spend $1 billion over five years in an effort to help areas hurt by a sharp downturn in coal jobs. (Read more)