New Virginia law sets up stakeholder process to diversify coal region’s economy

Governor Northam has signed into law a bill, passed by the General Assembly during the 2021 session, that ends decades-old tax credits for the coal industry and establishes a stakeholder process to inform economic development and transition in Southwest Virginia. The governor signed the bill on Thursday.

Ending the credits, which cost Virginia an average of $35 million annually in the past decade, was precipitated by a state report that found they were generating state losses and not incentivizing coal mining or the use of Virginia-produced coal as originally intended.

However, the Coalfield Employment Enhancement Tax Credit and the Coal Employment and Production Incentive Tax Credit have provided funding to the Virginia Coalfield Economic Development Authority (VCEDA), which will serve an increasingly important role in the region. For the last two decades, VCEDA received between $1 million to $3 million annually from the tax credit funds to help diversify the region’s economy through low-interest loans, workforce grants and VCEDA’s new renewable energy program.

“As VCEDA’s revenues from local taxes on the coal and natural gas industries continue to decline, the elimination of the revenue we receive from the coal tax credit further puts a strain on the economic development and diversification of the region, at a time when it is most needed,” said Jonathan Belcher, VCEDA’s executive director and general counsel. “This is around one quarter of our annual receipts, so we are hopeful that the stakeholder process can provide a means to help redress this situation, since ours was the only economic development program that had a direct negative fiscal impact from the elimination of the coal tax credit and was therefore most affected.”

The new law directs several state agencies to begin a stakeholder process and issue a report by December 1, with recommendations on how Virginia “can provide economic transition support to the coalfield region, with a particular focus on workforce redevelopment, economic diversification, reclamation of coal-impacted lands and brownfields, community revitalization, infrastructure improvements and clean energy development.”

“As Virginia transitions to clean energy, our leaders must ensure that the region that has powered our state and our country for more than a century is among the first to benefit from the new energy economy,” said Chelsea Barnes, Legislative Director with Appalachian Voices. “We will work with the Northam administration to ensure that this process is inclusive of the diverse stakeholders throughout Southwest Virginia and results in actionable recommendations to state leaders.”

The agencies charged with conducting the public meetings and public comment opportunities are the Department of Mines, Minerals and Energy, VCEDA, Virginia Economic Development Partnership Authority, Virginia Employment Commission, Southwest Virginia Workforce Development Board and Council on Environmental Justice.

Governor Northam proposed an amendment to the bill that would have allocated the tax credit funds to the University of Virginia’s College at Wise for new information technology and clean energy curriculum development. That amendment drew mixed reaction from the Southwest Virginia delegation, and ultimately did not garner the support needed to pass.

“Appalachian Voices supports the long-standing regional strategies of developing information technology and renewable energy industries, and views UVA Wise as a critical leader in realizing that commonly held vision,” Barnes said. “Governor Northam’s gesture of support for Southwest Virginia is appreciated. As has always been the case, it’s now up to the General Assembly to ensure that much-needed funds for economic and community development stay in our region and are deployed based on the outcomes of a strong stakeholder engagement process that will be skillfully led by DMME.”

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Appalachian Voices is a leading nonprofit advocate for a healthy environment and just economy in the Appalachian region, and a driving force in America’s shift from fossil fuels to a clean energy future.