Monday, November 26, 2012
Low Natural Gas Prices Hurting Coal Helping Electricity Bills
In a handful of states, while consumers and many businesses are benefitting, some local and state government tax collections are being impacted. The budgetary squeeze is particularly acute in West Virginia, where rich reserves of coal and natural gas have long been a key source of revenue.
In September, Arch Coal Inc. idled a local coal mine here that employed 50, and natural-gas producer Chesapeake Energy Corp. laid off 115 workers at a field office here earlier this month, relocating many of them to Ohio where its drilling is more profitable and where jobs and revenues continue to grow.
Even as the country gained thousands of oil and gas jobs in the past year, the coal sector lost thousands of jobs.
In Arkansas, severance-tax revenue from natural-gas production declined 33% through October, compared with the same period a year ago.
Earlier this year, Wyoming Gov. Matt Meade instructed state agencies to trim their budgets for next year by 8%, as a result of the impact of low natural-gas prices. Since then, the output of coal—another big revenue generator for the state—also has sharply slowed. State officials expect coal production will be 9% less than they had estimated, resulting in an additional hit of tens of millions of dollars.
In West Virginia, officials have been bracing for a sharp drop in coal-related severance-tax revenue this year, as a result of lower production and prices. But some have been surprised that gas-related revenue has also taken a hit as a result of low prices. (WSJ, 11/25/2012)