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West Virginia Severance Tax Collections Trending Higher

West Virginia's severance tax collections through the first nine months of fiscal year (FY) 2017 have come in $13 million above estimates, reversing a downward trend that began in 2015 when the state was forced to make spending cuts due in part to the steep decline of commodity prices at the time.

Revenue collections released by the state budget office show that from July 2016 through March, the state generated $200.8 million in severance taxes, well above the $187.8 million that was projected for the period. Currently, the state estimates that it will generate $262.5 million for the entire fiscal year. In FY2016, severance tax collections came in $195 million below estimates at $276.4 million, reflecting a tough period for the state's energy industries.

During a briefing with reporters on Thursday, Deputy Revenue Secretary Mark Muchow said increasing natural gas prices are also lifting the price of coal, with more of it being burned by power generators in the competitive market that favors lower costs. The state collected $40.2 million in severance taxes during March, compared to the $27.1 million that was projected for the month.

The state is still facing an estimated $123 million revenue shortfall for FY2017. Lawmakers were at work on a legislative fix Friday to plug part of that gap with rainy day funds and money from other accounts heading into the end of the regular session at midnight Saturday.

Producers pay 5% for the value of both coal and natural gas. The legislature eliminated additional volumetric fees last year.

In other news from the Capitol in Charleston, Gov. Jim Justice signed into law a bill that exempts some oil and gas industry storage tanks from a 2014 law aimed at better protecting public water supplies. The legislature passed a committee substitute for HB 2811 last month and Justice signed it April 4. The bill exempts more than 2,000 industry tanks from part of the Aboveground Storage Tank Act, including the submittal of spill prevention response plans and certified inspections.

The aboveground storage act was prompted by a January 2014 incident in which thousands of gallons of coal-cleaning chemicals leaked from a Freedom Industries processing facility on the Elk River, a waterway from which numerous communities draw their water supplies.

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