Thursday, November 20, 2008

Joint Minerals Committee drops tax breaks for coming "Clean Coal" facilities

WASHINGTON, D.C. -- We're here in the nation's chilly capital attending the State Fiscal Policy conference sponsored by the Center on Budget and Policy Priorities, and reading about plans to unveil the rehabilitated Star Spangled Banner tomorrow at the American History Museum.

With all the patriotic feelings stirred by the story behind that flag that flew over Fort McHenry Sept 14, 1814, it somehow was particularly gratifying to get an email message from Wyoming announcing that the Joint Minerals Committee has dropped proposed legislation extending tax breaks worth millions of dollars to the coal industry.

The Powder River Basin Resource Council's Shannon Anderson also represented the ESPC at the meeting. She sent news from the meeting about the committee's decision to pull the bills back. (They still may show up in the Revenue Committee at some point.) We knew these measures could cost the state, but Shannon reports that an official with DKRW, the company with plans to build a coal-to-liquids plant in Carbon County, said the exemptions could reduce the company's tax bill by $125 million.

These tax cuts should be considered equivalent to a state appropriation. The state would, in effect, invest these tax revenues in the plants, socializing a substantial portion of the private risk but, unlike the private investors, with no hope for enjoying a share of the profits the factory eventually will generate.

We know this is only a temporary victory. The taxes will be back, in whole or in part, in some other form. Casper Star-Tribune reporter Dustin Bleizeffer covered the meeting for the newspaper. He reports the idea could come back as an amendment to existing state law that grants property tax exemptions to pollution control equipment installed at power plants operating in the state.

Here's Bleizeffer's report, which you also can read at the website:

Clean coal tax exemptions stall

Star-Tribune energy reporter

The future of several proposed tax breaks for clean coal facilities is uncertain, but the legislation will likely get booted from the Joint Minerals,Business and Economic Development Interim Committee to the Joint Revenue Committee.

One of three bills that, together, would slash virtually all state and local taxes on such facilities could reappear as an amendment to an existing 2005 law that cut sales and use taxes for pollution control equipment added to coal-fired power plants.
Despite the shuffling, it may be too late to settle a number of concerns about the so-called clean coal incentive package in time for the 2009 legislative session.

"I do really want to do anything to help [clean coal development], but our time frame is too short and would do a disservice to the legislative process," said minerals committee co-chairman Sen. Grant Larson, R-Jackson.

The minerals committee heard testimony Wednesday in Casper from DKRW Advanced Fuels chief executive Jon Doyle. His company is developing the $2.5 billion Medicine Bow Fuel coal-to-gasoline plant in Carbon County. In September, the committee asked Doyle to research and draft legislation for possible incentives

Wyoming could offer to all potential clean coal developers in order to remain competitive with other coal-producing states.

In response, DKRW hired a Wyoming tax attorney to draft three bills. One would cut sales and use taxes. Another would cut ad valorem taxes. The third would cut severance taxes. As proposed, the legislature would revisit the tax exemptions no sooner than 15 years after commencement of operations.

Several committee members said that, for fear of losing a clean coal project to another state, they were willing to rush all or part of the package through.

But committee member Rep. Jeb Steward, R-Encampment, said adopting one or all of the tax exemptions would shut off a revenue stream that local communities -- and the developer itself -- would need to provide the public services for such a project.

"I'm from Carbon County, and clearly we're in an area that's depressed economically and looking forward to this project moving forward," Steward told Doyle.

"How is it in the best interest of your company to remove the ability of these local governments and the state to generate revenues to provide the services so you would have thriving communities?"

Steward went on to question whether adopting tax exemptions would not only curtail services but create an inability to provide a work force to sustain the industry 40 or 50 years into the future.

Doyle, and Holland & Hart attorney Larry Wolfe, who authored the bills, both admitted that if the state adopted the tax exemptions it would still have to figure out how to deal with the impacts of such large industrial developments. However, they were instructed to provide incentives that would already fit within Wyoming's constitution, so they looked to tax exemptions that have already been granted to other industries.

Committee member Rep. Debbie Hammons, D-Worland, reiterated the committee's support of clean coal development, but said slashing all potential tax revenue from such facilities may be too much.

"What these bills appear to say to me is that any coal facility, for the next 15 years, the state wouldn't receive taxes on them. And I think that's a tremendous burden to the state," said Hammons.

Shannon Anderson of the Powder River Basin Resource Council said tax breaks do not equal an investment in clean coal development. Her written testimony to the committee suggested that the "value-added" notion of refining coal in Wyoming would be lost if those facilities are not taxed.

Anderson spoke to the committee and said if state and local taxes are a deal-breaker for a $2 billion-plus facility, then it has bigger financial problems than just taxes.

"If the company can't make it with state taxes, then there's a larger economic problem that these bills won't fix," said Anderson.