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Editorial: A better idea for Virginia's controversial coal tax credits

Editorial: A better idea for Virginia's controversial coal tax credits

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The cold-eyed accountants for the General Assembly’s auditing arm made headlines recently when they ran the numbers on the state’s coal tax credit and concluded that it actually costs the state more jobs than it saves.

This is good news for coal-hating Democrats who have tried for years now to get rid of the program and bad news for Republicans who represent the counties that produce coal.

At least that’s the conventional reading of the Joint Legislative Audit and Review Commission’s report. Today we propose a more unconventional reading under which coal country Republicans should embrace that finding and use it to their region’s advantage.

Before we get to that, let’s review some fascinating big-picture facts that the auditors assembled. First, Virginia coal production peaked in 1990 and has declined ever since. It’s now about one-third of what it was then. That means it hasn’t mattered which party controls either the federal or state governments — coal didn’t decline under Democrats and rebound under Republicans, it’s declined under both. That’s because market forces, not political ideology, govern the coal market. Other forms of energy have simply become cheaper. We can see this most clearly in Virginia’s own energy production. In 2001, 51% of Virginia’s energy came from coal, 6% from natural gas. By 2018, 53% came from natural gas and just 10% from coal. Environmentalists don’t like the rise of natural gas because it’s also a fossil fuel (they’d prefer renewables) but natural gas has served to wage its own “war on coal.” Finally, there’s this: Virginia has just three coal-fired electric plants left, one of which will close in 2024, another in 2025. That will leave just the Virginia City plant in Wise County, which burns a mix of coal, coal waste and biomass.

Those —plus some accounting — are among the reasons why JLARC recommends the coal tax credit be scrapped. There are actually two different credits. Between them, the state spent $314.6 million from 2010 to 2018 trying to prop up an industry that’s in decline, the report says. The auditors further conclude that the taxes necessary elsewhere to pay for the coal tax credits in Southwest Virginia actually result in a net loss of 35 jobs, as well as reducing Virginia’s gross domestic product by $21 million.

It’s hard to argue with math, but is there a way to use that unforgiving math to Southwest Virginia’s advantage? We think there is.

Democrats, being the fiscal conservatives that they are, would like to save that $314.6 million, right? Of course not. They’d just like to spend it on something else. Coalfield Republicans should propose what that something else should be. Actually, we’ll go ahead and do it for them. They should spend it on the University of Virginia’s College at Wise.

Here’s why: Universities are economic engines, not only as major employers in their own right, but because research universities in particular generate spin-off businesses. Case in point: Torc Robotics was founded in Blacksburg in 2006 by a group of Virginia Tech graduate students. Today it’s affiliated with Daimler Trucks, employs about 175 people and is set to hire 350 more. It’s one of the biggest economic stars on our horizon.

The coalfields need a new economy. Here’s a way. They already have a college —UVA-Wise — but it’s one of just two state universities without any graduate programs. (UVA-Wise does have a proposed Masters’ in Education awaiting state approval.) When he was running for governor, Ralph Northam proposed turning UVA-Wise into a research university, with an emphasis on renewable energy. We thought that was an innovative idea and wonder why nothing has come of that. Here’s a chance for Republicans to call Northam’s bluff.

From 2010 to 2018, the UVA-Wise budgets add up to about $366 million. That’s not much more than the $314.6 million the state spent during the same time on those coal tax credits. What if that money had been spent instead on UVA-Wise — nearly doubling its budget? Which would have been the better investment? Ideally, that question should answer itself. We can’t undo the past but we can change the future: What if we abolish those coal tax credits — the JLARC auditors say that won’t really change the trajectory of Virginia coal —and spent that money instead on transforming UVA-Wise into the research university that Northam proposed? What would that do to the economy of the coalfields? (OK, granted, it would help the economy of Wise County a lot more than, say, Tazewell County, but the JLARC report says that the coal tax credits aren’t really helping anyone right now).

There’s already a vehicle available, too: The General Assembly in 2019 created the Southwest Virginia Energy Research and Development Authority, which aims to lure research dollars in all forms of energy to the region. (Let’s credit the two legislators who sponsored the bill creating the authority — Del. Terry Kilgore, R-Scott County, and state Sen. Ben Chafin, R-Russell County). The authority’s chair, Mike Quillen, told the Business Journal of the Tri-Cities: “This authority is going to think outside the box on energy projects that bring together innovative research, workforce development, and economic development under one umbrella. Our team is going to think creatively and strategically on how to pair renewable energy with job-creating projects.” Here we have a former coal company president talking up renewable energy. What if all that coal tax credit money went to this authority in a bid to create a modern Oak Ridge in the coalfields — just focused on renewables instead of the atom bomb?

This seems an opportunity both parties could embrace — Republicans because they represent the coalfields, Democrats because they want to promote renewable energy and profess an interest in looking out for the less-advantaged. (We’ll see here if that interest extends to less-advantaged geographical areas that don’t vote Democratic). Coal companies won’t like this idea — they’ll want to keep those tax credits. But why should Southwest Virginia tie its fate to an industry that has clearly not made the region wealthy when there’s an opportunity to create an entirely new economy? Southwest Republicans shouldn’t let Democrats take that coal tax credit money and spend it on something else; they should insist that the money be re-directed to more promising investments in Appalachia. We think that would be a Wise move.

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