Switch From Coal to Gas Hurting W.Va. Tax Collections

Tuesday, 27 Nov 2012 11:44 AM

By Sandy Fitzgerald

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West Virginia's economy is likely to suffer an adverse impact as energy demands transition away from coal to cheaper natural gas, the state's deputy revenue official told lawmakers Monday.
 
Mark Muchow, speaking to a state finance committee, said coal production in the state was down 10 percent this year and state budget officials are looking at the growth in natural gas to make up for the coal industry decline, the Charleston Daily Mail reported.
 
In the meantime, the state could face lower severance tax collections during the transition. He said the collections, which helped the state budget during the recent recession, have already dropped $45.6 million this fiscal year.
 
"The decrease in severance taxes is greater than we projected," Muchow said. "And it's occurring in both coal severance and natural gas taxes."
 
He noted that coal severance taxes are down 22 percent compared to last year and natural gas collections are down 36 percent.
 
Muchow said blamed the decline on weak global economic growth, decreased domestic coal demand, and low natural gas prices. He said while natural gas production is up by 25 percent, the price per million BTUs has dropped from $4 last year to about $2 now.
 
The lower gas prices mean lower tax revenues for the state, Muchow said.

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