Local delegation fighting repeal of coal tax credit

May save state money, but affect area economy, businesses

Matthew Bieniek
The Cumberland Times-News Thu Mar 17, 2011, 07:50 AM EDT

— CUMBERLAND — Gov. Martin O’Malley wants to end a tax credit that benefits the local coal industry, and local legislators are fighting the move. They say the credit is an important incentive for the local industry.

The proposal to eliminate the credit is contained in O’Malley’s budget reconciliation bill. The governor has tried to completely eliminate the credit in past legislative sessions as well.

“I’m certainly concerned. It gives our coal producers and consumers a slight edge,” Delegate Wendell Beitzel said. He and Sen. George Edwards have taken the lead in fighting the elimination of the credit, Beitzel said.

The credit is complicated but the basic principle is simple enough, Beitzel said. Public service companies and a few other designated companies, receive a $3 per ton credit for purchasing Maryland-produced coal. The credit cannot pay a company anything over their tax liability for the year, it can only apply up to the limit of their tax liability. The effect of the law, currently set to expire in 2021, is to encourage purchase of Maryland coal by Maryland companies. Beitzel said in effect it creates a slightly higher price for Maryland coal as well. The public service providers rebate part of their savings back to coal companies based on their contracts with the companies, Beitzel said.

The credit helps preserve jobs in the coal industry and helps provide a market for Maryland coal. Coal production in Maryland is limited to Allegany and Garrett counties.

Garrett County commissioners have also spoken out against the bill.

“On March 3, Chairman Gregan Crawford voiced this opinion before the House Ways and Means Committee. Chairman Crawford expressed the importance the coal industry has had on the economy of Garrett County over the years and how important the continuation of the credit is the Garrett County,” a press release from the county stated.

The fiscal and policy note prepared for the bill by the non-partisan Department of Legislative Services indicates a few million dollars in savings for the state should the credit be repealed early.

General fund revenues would increase by $4.5 million in fiscal year 2013, according to the policy note.

“Accelerating the termination date increases State revenues by a total of $34.5 million through fiscal 2021,” the policy note states.

According to the American Coal Foundation, more than $2 billion are pumped into the Maryland economy by the direct and indirect effects of coal production. Maryland stands 30th among the states in coal use and has 16 mines in operation, including two underground mines, according to the foundation. About 57 percent of the energy in the state is produced by coal-fueled plants, the foundations said.

Contact Matthew Bieniek at mbieniek@times-news.com

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