Incentives for coal plant leaves some unsure about cost

FRANKFORT, Ky. — Henderson County Judge-Executive Sandy Watkins is conflicted about the idea of giving a company tax incentives to build a coal-to-natural gas plant in his county.

He knows western Kentucky needs the jobs, but is unsure about a proposal to give a portion of that tax revenue back to the coal industry, as an incentive for companies to build alternative fuel plants here.
“We definitely need to have the coal mines operating,” he said. “But we also need to have those dollars going back into the community where the coal is extracted.”

The incentive is central to a package the Fletcher administration says state needs to persuade Peabody Energy of St. Louis to build a $3 billion plant that would convert coal to natural gas in western Kentucky. Over 25 years, the incentives could be worth as much as $300 million to Peabody and other companies that build such plants in the state.

About $120 million would be a credit of as much as 80 percent on the severance tax paid on coal used by companies in those projects. The legislature is expected to take up the incentive package, which was agreed to last week by leaders of the House and Senate, in a special session scheduled to begin Monday.

Lawmakers approved the severance tax in 1972 over strong opposition from the coal industry as part of a tax reform package that eliminated sales taxes on food and prescription drugs. The severance tax is 4.5 percent of the sale price of each ton of coal.

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Peabody has said the incentives package is crucial if it is to pick Kentucky as the site of a coal-to-natural-gas plant. State economic development officials said a new plant would create about 1,750 construction jobs, 250 permanent jobs for skilled workers at the plant and 550 additional jobs for miners to produce the coal to be turned into gas.

Kentucky.com