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Zach Drennen: Resource owners should repay WV by investing in its future – Charleston Gazette-Mail (subscription)

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With all the talk in West Virginia about driving economic development, retaining our youth, encouraging entrepreneurial spirit and even dragging our beleaguered state government out of debt, one significant source of income and wealth seems woefully absent from the conversation: royalties.

What I mean is when our hard-working miners pull out a load of coal, that coal is sold to a power plant or a steel mill, and royalties from that sale are paid to the land/mineral owners. Fair enough — that’s how business works.

The problem stems from the fact that the majority of land and mineral owners — whether they be individuals or a land-holding energy company — do not reside in West Virginia. They do not have ties to this land, and they are not particularly concerned with the economic or environmental well-being of our state. What land owners are most concerned about is their royalty check, and most of those royalties — to the tune of millions of dollars a year — leave the state, never to return.

We mine, drill and sell our greatest resource, the carbon beneath our soil, but we forgo much of the wealth generated from that enterprise — it leaves for New York, Washington, D.C., Charlotte or Los Angeles. We are, and have been for many years, a wealth extracting colonial enterprise for the out-of-state owners of our beautiful hills.

This state of affairs completely hamstrings our collective endeavor to deepen and diversify our economy and crushes any hope of propelling West Virginia into a state of economic well-being. By sending our wealth out of state, we prevent its support of existing businesses, and we choke off investment in local and regional business creation.

The challenge for us, then, is to keep that wealth from leaving the state so it can be reinvested in our local and regional economy. This would likely require a carrot-and-stick approach, probably large ones in both cases.

The stick might come in the form of higher taxes for royalties paid to out-of-state landholders. Such a tax would go a long way toward recouping the vast wealth being exported from our hills and give our local and state governments the resources they need to fund their stretched budgets.

But the possibility for some interesting “carrots” is there too: reduced tax rates for out-of-state royalty recipients who spend those royalties in-state or make significant investments in West Virginia; additional tax benefits for those landholders depositing a significant portion of their royalties into a locally run investment fund targeting economic development and diversification across West Virginia; preferential treatment (licensing, a leg up on state contracts, etc.) for landholding entities with local ownership or who keep a significant portion of their wealth in local banks and investments.

Whatever the case may be, we in West Virginia have to find a way to prevent the significant wealth generated from our hills from leaving the state, depriving us of much needed economic benefit.

Even once the coal is out, West Virginia’s coal and gas property owners still have an opportunity to play a major role in the economic diversification and development of West Virginia’s future. More and more work is being done across the state to explore the economic potential of post-mine land use. Many coal and gas properties could provide valuable acreage for farming operations, particularly as experimental plots of industrial hemp and lavender yield their first harvests and prove their viability on such sites.

Solar and wind generation have both proven viable on post-mine sites, and, despite resistance from within the coal industry, renewable energy production is the fastest growing energy sector in the U.S., adding more than 70,000 jobs annually to the U.S. economy. (By comparison, coal employment in West Virginia has remained steady at around 20,000 jobs in the last year).

Bio-charcoal from switch grass, various timber products, orchards, bike and ATV trails — all of these industries have the potential to create jobs and businesses on post-mine sites. But not without the property owners’ buy-in and support.

To that end, Strong Mountain Communities, a branch of Coalfield Development focused on economic development, has created a forum at their West Virginia Good Jobs Conference that includes both property owners and entrepreneurs in need of land for their fledgling enterprises.

Scheduled for November 6 to 8 at Tamarack in Beckley, this conference and its emphasis on post-mine land use will host a significant number of entrepreneurs, farmers, arborists, solar and wind techies, and ATV enthusiasts — all of whom will be looking for properties that might be usable and available for their profitable interests.

This is an opportunity for land owners to showcase their properties and to mingle with aspiring entrepreneurs who are looking for opportunities and sites on which to start their fledgling businesses. Furthermore, for any entrepreneur with an idea that might work on a reclaimed mine in West Virginia, the West Virginia Good Jobs Conference would be the ideal place to meet and interact with owners and operators of such properties.

More information about the conference and the post-mine land use forum can be found at strongmountaincommunities.org.

The royalties received by the owners of West Virginia’s coal and gas properties stem from the riches that come from beneath our hilly soils. To the largest degree possible, that wealth needs to stay in the state to spur additional investment in our communities and support viable post-mine land uses that create jobs and encourage economic diversification. Our future relies on it.

Zach Drennen is president of Strong Mountain Communities, a branch of Coalfield Development.

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