W.Va. leaders plan creation of natural gas trust fund

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CHARLESTON, W.Va. -- For decades, coal from West Virginia's vast deposits was mined, loaded on rail cars and hauled off without leaving behind a lasting trust fund financed by the state's best-known commodity. Big coal's days are waning, but now a new bonanza in the natural gas fields has state leaders working to ensure history doesn't repeat itself.

West Virginia's Senate president, Jeff Kessler, is pushing to create an oil and natural gas trust fund to support core government functions decades from now.

His goal: a cushion of funds long after the gas is depleted to buoy an Appalachian mountain state chronically vexed by poverty, high joblessness, and cycles of boom and bust.

The Democratic Senate leader said the previous generation missed out on creating a permanent fund based on coal severance tax revenues. Current residents, he said, should be prudent and set aside a part of the revenue from the extraction of natural gas to benefit future generations.

"This is really about protecting the long-term fiscal health of the state," said Ted Boettner, executive director of the West Virginia Center on Budget and Policy. "Without a plan for the future, we're likely to continue to experience a lack of economic diversity, cycles of boom and bust, and poor economic outcomes."

Other states with abundant natural resources have set up legacy funds as Alaska voters did in 1976 with a constitutional amendment creating the Alaska Permanent Fund to protect a portion of that state's oil wealth for future generations. Mr. Kessler is still crafting his Future Fund proposal for the 2014 legislative session that opens in January. He said he's leaning toward presenting it as a proposed constitutional amendment. His call for a trust fund would go on next year's ballot for voters to decide if it clears the Legislature.

His proposed endowment would be built with a portion of oil and natural gas severance tax collections.

Severance taxes, including those on coal and other natural resources, are a big part of the state budget.

They contributed an estimated $462 million, or 11 percent, to total general tax revenues in the fiscal year that ended in June.

The trust could not be tapped for a specified number of years and would be limited to supporting a few needs including education, economic development or tax relief once it became accessible.

Mr. Kessler said constitutional protections would lock down the fund from lawmakers and interest groups tempted to pry it open prematurely to spend money elsewhere.

Natural gas production in the big Marcellus Shale formation underlying parts of West Virginia and other nearby states has been rising even faster than energy experts had predicted.

That production in West Virginia alone nearly doubled in the last five years and could nearly double again in coming years, they say.

As a result of the production boom, natural gas severance tax collections in West Virginia are expected to surge.

And while West Virginia has been a coal-producing powerhouse for generations, Mr. Kessler noted, some of its most economically stressed areas are in the heart of the coalfields.

"When the [coal] seams got thinner and the jobs were done, there was just nothing to sustain their communities," Mr. Kessler said. "I don't want to see that happen again ... when I see another golden opportunity where we have something in great supply and enormous demand."

marcellusshale


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