Oklahoma transferable tax credits for coal grow tenfold

That comes to more than $15,000 a year for every miner, trucker, mechanic, welder, electrician and other support worker directly employed by Oklahoma mine operators and their subcontractors.

The coal credits were suspended in 2010 as part of a two-year budget-balancing deal, but holders are still exercising credits they received for previous mine production. New production will be eligible for the credits in mid-2012.

That could change if some lawmakers get their way. Rep. David Dank, who is heading a task force investigation of state tax breaks, is among those challenging the need for the credit.

“There's no new jobs,” said Dank, R-Oklahoma City. “It's just a handout. It's something that we're just giving away.”

Industry advocates see things differently. “Whatever the cost of that credit is to the state, the state reaps many times that amount back,” said state Department of Mines Director Mary Ann Pritchard.

In the late 1980s, eastern Oklahoma mining companies faced a crisis. Tough new environmental rules and price competition from cheap natural gas had caused their market to shrivel. Hundreds of jobs had been lost, and more were in peril.

State and federal lawmakers sprang into action. They helped Oklahoma Gas & Electric Co. recruit a big power company, AES Corp., to build a low-emission generating plant designed to burn high-sulfur Oklahoma coal. Located near Panama in Le Flore County, the Shady Point plant cost $485 million and now provides electricity to 230,000 homes and businesses.

To seal the deal, the Legislature created a $1-per-ton tax credit to subsidize purchases of Oklahoma coal, starting in 1989.

It later bumped the credit to $2 and passed a law requiring all coal-fired power plants to include at least 10 percent Oklahoma coal in their fuel mix.

In the early 1990s, another crisis loomed. The U.S. Supreme Court struck down the “Burn-Oklahoma” law. OG&E negotiated lower transportation prices for Wyoming coal, automatically reducing the price it paid for Shady Point electricity. Shady Point could no longer afford to buy higher-priced Oklahoma ore.

So Lundy Kiger, a former middle school principal who became Shady Point's government relations director, made the rounds of the Capitol delivering a blunt message: We're losing $8 million a year on our coal purchases. We need a bigger tax credit to keep buying Oklahoma coal. And we want to sell our credits to other people, because we don't pay enough state taxes to use them all.

“We've put this in your hands,” Kiger recalled telling one House leader. “We've gone as far as we can go. If we're not able to pass this tax credit … we're not going to have any choice but to go to Wyoming coal.”