Last week, Washington Governor Christine Gregoire came out crusading for closing tax loopholes to to shore up the state’s crumbling budget. Here are some things that made her list: sellers of gold bullion, cattle operations, free-riding banks, out-of-state businesses, chili canners masquerading as meat processors and corporate board members collecting big checks.
Here’s one that didn’t: a $4 million annual sales tax exemption on out-of-state coal burned at TransAlta’s Centralia power plant, Washington’s largest single source of greenhouse gas emissions.
It’s a curious omission, especially from a governor who talks so often and eloquently about clean energy as a solution to the state’s economic woes.
With a $2.6 billion budget shortfall (following a year when services were already slashed), you might also assume the governor would claw back every dollar possible to preserve things that voters value, like schools and transportation solutions. On this front, though, the Legislature has had to take the lead with SB6573, which would eliminate the sales tax exemption for coal, a dirty source of energy that’s truly outlived its usefulness.
Prime sponsor Sen. Eric Oemig (D-Kirkland) says ending the coal subsidy is a “no brainer” in this economic climate:
Why would you help buy dirty coal when you’re actually trying to tackle greenhouse gas emissions and pollution generally and support renewables like wind and solar and geothermal? Why would you give away $4 million with no strings attached? $4 million buys a lot of lunches for school kids or health care for the elderly.
There’s also some interesting history behind the tax exemption that bears some scrutiny, especially since Centralia is the only coal-burning power plant in Washington—and therefore the only one that enjoys the subsidy.
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In the late 1990s, the Legislature essentially agreed not to collect sales tax on the coal Centralia burns in order to help offset the considerable cost of installing new equipment to reduce the plant’s pollution. But the subsidy was originally contingent upon the plant getting at least 70 percent of its coal from the local mine next door, an incentive to preserve some of the best blue-collar jobs in Lewis County.
The requirement to buy local coal was dropped along the way. So when Centralia’s new owners (the Canadian company TransAlta Corp.) closed the mine in 2006, dealing a huge blow to a struggling local economy, the tax break remained in place. Now Washington is subsidizing the purchase of millions of tons of out-of-state coal from Wyoming and Montana. (And does a company that earned $3.1 billion in revenue last year seriously need the subsidy?)
Legislation introduced last year to eliminate the coal tax exemption would have directed some of the money to re-training any displaced workers at Centralia, which would be a fair use for it. (The legislation didn’t pass.) This year’s bill would simply return the money to the general fund, though Oemig says he’s “open to” ideas about how the money might be directed.
Closing the tax loophole on coal is an obvious opportunity to align the state’s tax policy with its climate and energy goals. Plus, I can personally think of lots of things I’d rather see the state invest in, whether it’s retraining workers for green-collar jobs, supporting renewable energy, or offering my kid a good education at a public school. How about you? Thoughts on how we could better spend $4 million in a bleak budget year?
Gold bullion photo courtesy of flickr user bullionvault via the Creative Commons License.
This is part of a series of Sightline Daily posts on coal in the Northwest:
Coal Cuts: Oregon vs. Washington
Matt the Engineer
So we’re giving a $4M/year subsidy to a canadian company for buying coal from other states and burning it here? Nice. Bill Moyer interviewed Greg Mortenson the other day, who talked about how he could build 30 to 40 schools in Afganistan for $1M (this also happens to be how much it costs for us to keep one military person in Afganistan for a year). But we’re spending four times that – per year – supporting coal.
Matt,Excellent points made. Let’s put Washington’s economy back on track – eliminate the subsidy.
GOOD: Eliminate coal subsidiesBETTER: Finally add pricing on coal’s climate pollutionHOPE: Transition away from coalSurely someone in the Washington legislature is willing to go the next step and push through a carbon tax like BC has.
TransAlta switched to coal from the Powder River Basin in Wyoming because it is naturally lower in sulfur and thus, less costly to clean and stay within SO2 emissions caps. It’s a common strategy for coal power plants to use PRB coal for this reason. See here and here.Perhaps the State could remove the sales tax exemption but create an exemption for any materials needed to clean the dirtier local coal. Since TransAlta spent over $100 million on that mine I doubt they would turn such an offer away without talking. Lawmakers may have to pony up with a sales tax incentive for local coal but at least the local jobs would return, generating more revenue.It’s a complicated issue, but giving a break for out of state coal sure seems silly.