President’s Budget: Cut Coal Tax Breaks, Halt Unneeded Abandoned Mine Lands Payments

President Obama’s new budget proposal to Congress includes the elimination of four coal tax preferences (see p. 16), which would result in $958 million more in federal revenue over the next five years.

The budget states that "coal subsidies are costly to the American taxpayer and do little to incentivize production or reduce energy prices.” It cites a 2009 commitment by the U. S. and the other G-20 nation to phase out fossil fuel subsidies in the medium term. The budget says that “removal of market distortions created by fossil fuel subsidies will lead to a more efficient allocation within the energy sector as well as across sectors, likely with positive impacts on national output and gross domestic product.”

As initially proposed in last year’s budget, the President also proposes to eliminate payments from the Abandoned Mine Lands Fund to states that are “certified” (see p. 7), meaning they have already cleaned up all of the abandoned mines in their states. This proposal would deny payments to states like Wyoming, which collects significant AML tax revenue due to high levels of mining production, but have no abandoned mine land projects left. Read more here. The proposal does not, however, re-direct those monies to states with backlogs of needed reclamation, like in Central Appalachia. OSM estimates that around $2.5 billion is needed to reclaimed existing abandoned mine lands in Central Appalachia.

A new paper authored by Downstream Strategies and co-sponsored by Appalachian Transition analyzes the role and potential of mine reclamation in the future economic transition of the region. It notes that $2.5 billion is likely a significant underestimate of the cost of reclaiming these sites. Read it here.

Jason Bailey

About Jason Bailey

Jason Bailey is Director of the Kentucky Center for Economic Policy and serves as Research and Policy Director of the Mountain Association for Community Economic Development.