The West Virginia Senate passed big tax cuts for the coal and gas industry Wednesday, at a time when the state faces huge budget deficits and is raising taxes on consumers.
The cuts would lower the severance tax rate paid by coal, gas and oil companies by 40 percent by the 2019 fiscal year, a loss to state and local governments of about $170 million per year, according to one estimate.
The bill (SB 705) passed 19-15, with the support of every Republican. On the Democrat side, all but Sen. Jack Yost, D-Brooke, voted against the tax cuts.
The West Virginia Department of Revenue has not yet completed a fiscal note for the bill, which was drafted in committee on Monday, but Gov. Earl Ray Tomblin is against the tax cuts, which he says the state cannot afford.
Coal and gas currently pay a 5 percent severance tax on the total value of the minerals they extract from the ground. That tax rate would fall to 4 percent in July 2017, and then to 3 percent in July 2018.
The coal industry has lobbied for the tax break, which initially applied only to coal, and Republicans argued that the promise of a future tax break could convince some companies to keep mines open. They noted that West Virginia's neighboring states have lower severance taxes.
"They are looking for some light at the end of the tunnel," said Senate Finance Chairman Mike Hall, R-Putnam.
Hall seemed hesitant about voting for his own bill, saying that he might have voted against it if it didn't still have to get through the House of Delegates.
The Senate also voted Wednesday to raise the sales tax and voted last week to nearly triple the tax on cigarettes.
"I just find it hard for us to turn around and say our solution to the state's fiscal woes is to grant more tax cuts to business and industry and put more tax burden on the people we represent," said Senate Minority Leader Jeff Kessler, D-Marshall.
Democrats offered an amendment Tuesday to add the tax cuts for natural gas - which competes with coal on electricity generation - to the bill.
"The addition of gas was just a political maneuver to try to derail the bill and so we didn't let it happen," said Senate President Bill Cole, R-Mercer.
Nonetheless, Republicans embraced the inclusion of gas industry tax cuts in the bill.
"I tell you what, while the price of gas is so incredibly depressed, I'm not sure that we don't have to give a little bit of support here, as well," Cole said.
He said he would continue to work with House leaders on the bill.
Democrats argued that the bill would do nothing to keep mines open and amounts to a giveaway to the industry.
Sen. Ron Stollings, D-Boone, said the tax cuts are fiscally irresponsible and are small change compared with cheap natural gas, environmental regulations and the worldwide economic factors plaguing the troubled industry.
"All these other states that don't have a severance tax, they're getting hit as hard as we are," said Stollings, who comes from part of the state hardest hit by coal's travails. "We're competing with out West, with Wyoming; we're competing with China's economy."
Sen. Greg Boso, R-Nicholas, said his county has lost 16 mines in the past several years and that the last mine in the county is scheduled to close in August.
"This is a good way for us to tell the coal industry, 'We believe in you and we're willing to help,' " Boso said.
Murray Energy CEO Bob Murray, who runs the West Virginia's largest coal company, has been asking lawmakers for an immediate cut in the severance tax for nearly a year. Murray also is a major Republican donor, having given $250,000 to get Republican legislators elected in 2014.
Sen. Mike Woelfel, D-Cabell, said the arguments sounded like what he had heard in divorce court.
"Coal's been so good for us, it's done a lot for us, we love coal and let's give coal an alimony award here in our separation," Woelfel said, and then hinted at Murray's support. "We're not in a position where we can give anybody an award just because they've been a faithful partner to us. I would hope we don't vote on this bill based on potential donors in the energy sector."
Reach David Gutman at david.gutman@wvgazettemail.com, 304-348-5119 or follow @davidlgutman on Twitter.