SD34 - Annual Report of the Virginia Coal and Energy Commission


Executive Summary:
The Virginia Coal and Energy Commission studies coal as an energy resource and promotes the development of renewable and alternative energy resources other than petroleum. This legislative commission is a 20-member body comprised of 12 legislators (six from the House and six from the Senate) and eight citizen members. Commission meetings in 1995 were convened in Blacksburg and Abingdon, with a concluding meeting in Richmond immediately prior to the 1996 Session of the Virginia General Assembly.

COAL PRODUCTION TAX CREDITS

The Commission's 1995 activities focused principally on Southwest Virginia's declining coal industry. Legislation passed by the 1995 Session of the General Assembly provided some tax relief to Virginia's coal producers in the form of production tax credits, but the legislation contained conditions and contingencies that delayed and minimized the program's potential benefits. The Commission's coal subcommittee was directed by the 1995 Session of the General Assembly (pursuant to House Joint Resolution 586) to continue its study of methods to reverse the downward trend in coal production and employment. The subcommittee's chief agenda item was further review of the 1995 legislation with a view toward 1996 amendments strengthening the measure.

The coal subcommittee ultimately recommended, and the Commission endorsed, amendments to the 1995 tax credit legislation that were incorporated into Senate Bill 539 and House Bill 1454 introduced in the 1996 Session. House Bill 1454 was enacted by the 1996 Session and signed by the Governor. Its provisions make the tax credits available immediately; coal producers can file for these credits on their 1996 returns. The bill also eliminated a provision in the 1995 bill making the availability of the credits in any year contingent upon general fund revenues exceeding official projections by at least the cost of the credits. Finally, increases to the legislation's key components, such as the seam thickness credits, doubled the likely benefit to the coal producers from approximately $15 million to $30 million in annual tax savings.

LOW-INCOME ENERGY ASSISTANCE PROGRAMS

The Commission also endorsed legislation recommended by its Energy Preparedness Subcommittee. During its annual review of low-income energy assistance programs available to the Commonwealth, the subcommittee concluded that the heating fuel assistance and home weatherization programs should be better coordinated. The subcommittee members learned that federal law governing funding for fuel assistance program permitted reallocation of up to 25 percent of Virginia's fuel assistance block grant to weatherization programs. Following extensive discussions between the subcommittee, the Departments of Social Services and Housing and Community Development, and the Attorney General's Office, it became apparent that legislation would be required to effect such reallocation. The subcommittee's proposal, endorsed by the full Commission and enacted by the 1996 General Assembly and approved by the Governor in House Bill 675 requires reallocation of at least 7.5 percent of the fuel assistance block grant to weatherization assistance programs.

INTERSTATE OZONE AGREEMENTS

The Energy Preparedness Subcommittee was also directed to review a legislative proposal promoted by the Virginia Center for Energy and Economic Development (CEED), a nonprofit organization dedicated to promoting coal as an energy source. CEED asked the Commission to endorse legislation conditioning Virginia's participation in any interstate ozone agreement upon General Assembly review following a study of any such proposal's economic and environmental impact.

CEED's proposal was prompted by recent activity by the Ozone Transport Assessment Group (OTAG), an EPA-coordinated organization of state environmental protection agencies. The premise of OTAG is that some states required to meet mandatory Clean Air Act emissions standards for ozone are unable to do so because of neighboring states' emissions. These emissions are said to be transported interstate by wind patterns into the nonattainment areas. OTAG member states with nonattainment areas hope to obtain cooperative agreements with neighboring states to voluntarily reduce their ozone-producing emissions.

The Energy Preparedness Subcommittee received testimony from OTAG and CEED representatives on the issue. An OTAG representative advised the subcommittee that he found CEED's proposal unobjectionable, in principle. He noted, however, that the timing of any prior legislative review would be critical. The subcommittee recommended and obtained Commission endorsement of proposed legislation incorporating key elements of the CEED proposal. The legislation was introduced as House Bi111512, which was passed by the 1996 Session and signed by the Governor.

OIL AND GAS

Virginia's natural gas industry is enjoying high levels of conventional and coal bed methane natural gas production. Natural gas industry representatives told the Commission that this industry should be better represented both on the Virginia Coal and Energy Commission and on the Coalfield Economic Development Authority (CEDA). The Oil and Gas Subcommittee endorsed and the Commission approved legislation (i) stipulating that the Commission's at-large appointees shall include natural gas representatives and (ii) adding to CEDA a representative named by the largest oil and gas producer. The General Assembly approved and the Governor signed both measures: Senate bills 285 and 286.