The House of Delegates voted overwhelmingly Thursday to give major tax cuts to the coal and gas industries, approving a proposal from Gov. Earl Ray Tomblin that helps balance this year's budget while costing the state about $110 million annually beginning next budget year.
The bill (HB 419) would remove the "excess" severance taxes on coal and gas production that were put into place in 2005 to pay off old debts related to the state's workers' compensation fund.
Thanks largely to the Marcellus Shale boom, those debts are scheduled to be paid off within the next two years, about a decade ahead of schedule, so Tomblin proposed removing the taxes.
The bill would use the excess severance tax money that's collected through the end of June to help fill the state's gaping $354 million budget shortfall this year. That would be the first time that money went to general revenue, rather than the workers' comp debt. Then, as of July 1, the excess severance taxes would disappear.
Other funds that have helped pay down the debt - from the horse racing industry and from a surcharge on private employer insurance - will remain in place.
The gas and coal taxes brought in $122 million in fiscal year 2015, and were projected to bring in $110 million in fiscal 2017, which starts July 1.
Tomblin, a Democrat, has said that the taxes were originally only to pay down the workers' comp debt. Even though the state now faces declining revenues and wave after wave of cuts, now, with that debt largely paid off, the taxes should be removed, Tomblin has said.
The bill passed 96-3, with Delegates Tim Manchin, D-Marion; Clif Moore, D-McDowell; and Isaac Sponaugle, D-Pendleton, in opposition. The bill returns to the Senate for approval of a minor amendment, before going to Tomblin for his signature.
"This is about a promise that was made 10 years ago, when we stepped up and the other industries stepped up to help privatize workers comp," said Bill Raney, president of the West Virginia Coal Association.
That's the argument Tomblin has made and it was the argument made in the Senate where the bill passed unanimously.
But it was not much discussed in the House, where delegates argued that a tax cut would help slow the decline of the coal industry.
"If you want more layoffs, I encourage you to vote against this bill, kill it, lay more people off," said Delegate Rupie Phillips, D-Logan.
Phillips and several others noted that West Virginia's severance tax is higher than in surrounding states.
"Simple logic will tell you that there's going to continue to be layoffs unless we do something to make our mines and our operations more competitive," said Delegate Josh Nelson, R-Boone.
But even Raney said he didn't expect a big rebound when coal industry taxes go down in July.
"I don't think anybody knows that for a fact because there are so many variables involved in the market," he said.
The factors plaguing Appalachian coal - cheap natural gas, depleted seams, low prices and demand for steel-making coal and government regulations - are much broader than the West Virginia severance tax rate.
The nation's four largest coal producers by output have lost more than 99 percent of their market value since 2011.
"If I had ever been presented with any evidence that there was one single job that was going to be saved by giving this severance tax cut, this giveaway, to coal, I'd be able to do [support the bill]," Manchin said. "This is a giveaway without anything in return for the state of West Virginia or her people."
Several delegates said they didn't think the tax cut would help the coal industry, but they would vote for it anyway.
"I don't think it's going to create a job, I don't think it's going to save a job, I think a lot of this money is going to go to people out of state that own the coal companies," said Delegate Mike Pushkin, D-Kanawha. "But I hope you're right, I really hope you're right, I hope this does something to save jobs."
Delegate Nancy Guthrie, D-Kanawha, urged her colleagues to vote no.
"I promised all the people in my district that I wouldn't vote for corporate giveaways until we figured out how to fix our roads and fund PEIA," she said. "We've done neither one of those things and yet we're about to give another tax break to largely out of state corporations."
Despite that, Guthrie voted for the bill.
Reach David Gutman at david.gutman@wvgazettemail.com, 304-348-5119 or follow @davidlgutman on Twitter.