We attended two interim meetings in November, discussing the economic impacts of the changes in production of coal, oil, and natural gas in West Virginia. The outlook for coal in the next several years is pretty bleak! Most of West Virginia’s GEP comes from coal and production is down, according to Mark Muchow, Secretary of Tax and Revenue. There are several reasons including the lack of demand from the planned shutdown of a large number of coal-fired energy plants, as well as the current environmental wild card atmosphere.

Coal has been the biggest contributor to WV’s economy over the last 8 years, but is projected to much less over the next 5 years. While oil and natural gas production is up some 25%, severance taxes are still down because demand is down, therefore selling prices are down. As far as how WV compares in severance tax rates (5%) to our neighboring states, we are about equal with Kentucky (4 ½%), a little higher than Pennsylvania who has some sort of impact fee (2 ½%), and ahead of Maryland, Virginia, and Ohio, all having nothing significant in the way of a severance tax. This landscape has major effects on county budgets, not only from a reduction in severance tax revenue collections, but also in reduced property tax collections and loss of jobs when power plants and coal mines close. The up-tick in the oil and gas industry is wonderful, but is not able to level out the lost due to decreases in the coal industry. While some counties may see losses and some gains, because of the volatility of the market, there is a tremendous fluctuation in taxes that counties count on from year to year.