State Lawmakers Consider Tax Trust Fund

- State Lawmakers Consider Tax Trust Fund

Tuesday, June 14, 2011
Knight Ridder/Tribune Business News
by David Beard, The Dominion Post, Morgantown, W.Va.

Could a severance tax trust fund build a hefty savings account for West Virginia as it has for Alaska, Wyoming and a handful of other states?

Jill Kriesky, an economist with the West Virginia Center on Budget and Policy, thinks it could and brought the idea before the Legislature's Joint Commission on Economic Development, on Monday morning -- the first day of the June interim meetings.

Kriesky's proposal projects that a 1 percent severance tax hike on coal, oil and gas extraction and production could raise $100 million in its first year. A "Severance Tax Permanent Fund" could have a principal balance of $612 million by 2015, $1.18 billion by 2020 and $3.77 billon by 2035.

The state's entire general fund is just over $4 billion now.

The current severance tax is 5 percent and raised $400.5 million in fiscal year 2010, according to Revenue Department figures.

Kriesky told the joint House-Senate commission that six states and the Navajo Nation have such trust funds. They're all western states with relatively undiversified economies heavily dependent on nonrenewable natural resources.

They use the money for such things as boosting their general funds, inflation-proofing, enhanc- ing education, infrastructure and distribution to the public.

Alaska's fund was created in 1976 and has a balance of $40.3 billion. Wyoming's 1974 fund has $4.5 billion. North Dakota has three funds. Its newest, the 2010 Legacy Fund, already has $619 million.

Two unsuccessful Democratic gubernatorial candidates raised similar ideas in their primary election campaigns. Both proposals were more limited -- focused on increased revenues from Marcellus shale gas extraction.

Secretary of State Natalie Tennant proposed the Innovation 2020 Fund to benefit education, local economic development and several other areas.

Acting Senate President Jeff Kessler proposed the West Virginia Future Fund, using 25 percent of the severance tax collected from natural gas extraction and production. The fund would go untouched for 20 years, and would then be used for tax relief, education and economic diversification.

Kriesky noted several advantages to a severance tax trust fund: Nonrenewable resources can produce sustainable wealth. It can stabilize boomand-bust economic turbulence. It can build assets to pay off unfunded liabilities -- such as the OPEB debt.

Kriesky's presentation, which she didn't get to complete Monday, also touched on jobs. She noted that 87 percent of coal produced in West Virginia is exported -- so out-of-state interests would be paying the tax with little effect on in-state jobs.

Sen. Richard Browning, DWyoming and commission co-chair, had questions about that. "How many jobs would it kill?" he asked. Kriesky didn't know. Browning suggested the commission have her back later to complete her presentation and answer questions.

Referring just to coal, Delegate Kevin Craig, D-Cabell, said mining in West Virginia is already more costly than in surrounding states. "If we layer another burden on mining we won't be nearly as competitive as we need to be."

Kessler also was skeptical about Kriesky's more expansive proposal, partly because it raises taxes.

"When you talk about raising a tax," he said, "that's going to make everyone scream. If you take an existing tax and reapportion it, it's going to make everyone scream."

His Future Fund does neither, he said. It uses a new pool of money derived from anticipated expanded Marcellus production.

"No one actually owns it at this point," he said, so the Legislature could set a portion aside to save for future generations.

Copyright (c) 2011, The Dominion Post, Morgantown, W.Va.

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Walz, Other Lawmakers Say Drill and Dedicate

- Walz, Other Lawmakers Say Drill and Dedicate

Wednesday, June 08, 2011
Knight Ridder/Tribune Business News
by Mark Fischenich, The Free Press, Mankato, Minn.

Congressman Tim Walz and a bipartisan group of other lawmakers are taking another shot at tackling America's looming energy crisis.

A Mankato Democrat, Walz and allies from Pennsylvania to California are pushing a proposal that would allow more oil drilling off the nation's coasts and dedicate some of the resulting trillions of dollars in drilling-rights royalties to energy independence programs.

The bipartisan group first offered the idea three years ago -- when gas prices were approaching $4 a gallon and leaders of the Republican and Democratic parties were locked into opposing positions on how to deal with the nation's long dependence on foreign oil.

After the summer of 2008, gas prices dropped dramatically, partisan gridlock derailed passage of a national energy policy, the Deepwater Horizon drilling disaster unleashed the biggest offshore oil spill in American history, gas prices returned to $4 a gallon, and three years passed with no progress on a national energy plan.

On Tuesday, Walz told a group of business owners, labor representatives and energy researchers at Minnesota State University that continued inaction will cause great harm to the nation's economic outlook.

"(If) we don't anything about this, what does the future look like?" he asked.

The answer, according to Walz, is America sending more and more of its wealth to foreign oil producers. It's already nearly $400 billion a year going to oil-producing countries, some of which actively dislike the United States.

Failing to act now will also mean ceding the jobs and potential for exports that will be available to nations that lead the way in creating alternative energy technology.

"We have all our eggs in one economic basket," he said of the current reliance on fossil fuels. "We don't even own the basket, and it's a fragile basket at that."

No one in MSU's Minnesota Center for Automotive Research disagreed with Walz. The facility, which is doing research on alternative fuel vehicles, needs $480,000 to complete a dynamometer that would allow the testing of hybrid vehicles while they're running at highway speeds.

Federal and state funding was crucial in establishing the center, which moved into a new facility at MSU earlier this year, according to director Bruce Jones. Additional funding is likely to be harder to come by as Washington increasingly focuses on deficit reduction, but Walz made the case for continued -- and growing -- investment in alternative energy.

"We're preaching to the choir," said Joe Lorentz, a local highway contractor.

Lorentz pointed to the students and researchers across the table, urging them to talk to everyone they know about the importance of government investment in renewable energy and infrastructure improvements.

"Champion this bill," Lorentz said. "... Educate the public as best you can."

The bill -- called the Infrastructure, Jobs and Energy Independence Act -- would open up more of America's coastline to drilling for oil and natural gas. Royalties paid by energy companies for the drilling rights, which would total an estimated $2.2 trillion or more, would be dedicated to a variety of specific spending.

Infrastructure improvements -- including highways and bridges -- would get 20 percent. Research, development and production of alternative energy and energy efficiency would receive 15 percent. Another 8 percent would be aimed at cleaning up coal-fired power plants, and 5 percent would go to nuclear and carbon-free energy production.

Smaller amounts would go to environmental restoration, energy conservation, water clean-up and heating assistance for low-income Americans.

States where the additional oil drilling would occur would get 30 percent of the total proceeds, and 10 percent would be applied to reduction of the national debt.

Even as he makes his second attempt at getting the ambitious proposal off the ground, Walz said he thinks it has a genuine chance to become law. Some parts of it could be implemented sooner, but he expects the 2012 presidential election -- including a serious debate about America's energy future -- will have to run its course before the bulk of the proposal could be implemented.

Copyright (c) 2011, The Free Press, Mankato, Minn.

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UK Oil Firms to Brief Lawmakers Next Month on Tax Hike Impact

UK Oil Firms to Brief Lawmakers Next Month on Tax Hike Impact

Monday, April 04, 2011
Dow Jones Newswires
by  Alexis Flynn

U.K. lawmakers will hear submissions next month from the country's major oil and gas producers as to how a large tax increase is affecting the industry, the Energy and Climate Change Committee said Monday.

In a one-off evidence session scheduled for May 4, members of the parliamentary committee will hear oral submissions from Oil & Gas UK and the Oil and Gas Independents' Association.
The meeting comes as several large companies said they were reconsidering billions of pounds of investments in oil and gas production after a shock tax increase in Chancellor of the Exchequer George Osborne's budget two weeks ago.

In a statement confirming it will participate in the session, Oil & Gas UK said it was consulting its members to quantify the full impact of the budget move on investment and will publish the findings by the end of April.