OK’s Coal Subsidy Adds Fuel to Tax Credit Debate

  • Joe Wertz

A tax credit designed to help eastern Oklahoma coalminers has become a money machine for dozens of insurance companies, according to a report filed by Oklahoma Watch.

The transferable tax credit has also reduced state tax revenue by more than $60 million over the last eight years, the nonprofit investigative journalism outfit reported in a series of articles published Sunday in The Oklahoman, Tulsa World and on the organization’s website.

That averages more than $15,000 a year for each of the estimated 500 people directly employed by mining companies or working for businesses that contract with the mines, such as trucking and welding firms, wrote Oklahoma Watch’s Warren Vieth.

In the late-80s, the coal industry faced stiffening environmental rules and price competition from natural gas. To help prevent job losses in the coal industry, the Legislature in 1989 created a $1-per-ton subsidy for Oklahoma coal.

The subsidy was created to help encourage AES Corp. to build a power plant that would burn high-sulfur Oklahoma Coal, Oklahoma Watch reported.

The tax credit was later increased to $2-per-ton, and the Legislature passed a law mandating that all coal-fired power plants in the state use at least 10 percent Oklahoma coal.

In 1992, the U.S. Supreme Court struck down the “Burn-Oklahoma Law,” and in the 00s, the tax credit was increased again, this time to $5-per-ton.

Like the purchaser’s credit, it was freely transferable, wrote Oklahoma Watch. For every $50 ton of coal mined and burned in Oklahoma, the state was now picking up $10 of the tab.

The coal credits were among those suspended in 2010 during a two-year moratorium to help balance the state’s budget, but Oklahoma Watch reports that holders are still “exercising credits they received for previous mine production.”

State Rep. David Dank, R-Oklahoma City, who co-chairs the tax credit task force, challenged the coal tax credit.

“There’s no new jobs,” Dank told Oklahoma Watch. “It’s just a handout. It’s something that we’re just giving away.”

Oklahoma Watch’s coal credit series also focused on rural coalminers, who depend on the tax credit for survival.