After coal, W.Va. ponders gas trust fund

For decades, coal from West Virginia’s vast deposits was mined, loaded on rail cars and hauled off — without leaving behind a lasting trust fund financed by the state’s best-known commodity.

Big coal’s days are waning, but now a new bonanza in the natural gas fields has state leaders working to ensure history doesn’t repeat itself.

West Virginia’s Senate president, Jeff Kessler, is pushing to create an oil and natural gas trust fund to support core government functions decades from now. His goal: a cushion of funds, long after the gas is depleted, to buoy an Appalachian state chronically vexed by poverty, joblessness and cycles of boom and bust.

“Had we had the good sense to put a few cents aside of every ton of coal … that has come out of our ground, we’d probably be the richest state in the Union instead of in many respects the poorest,” Kessler said.

Other states with abundant natural resources have set up legacy funds, much as Alaska voters did in 1976 with a constitutional amendment creating the Alaska Permanent Fund to protect a portion of that state’s oil wealth for future generations.

In 2010, North Dakota voters approved their Legacy Fund, which has been rising faster than predicted with booming oil production. The fund gets 30 percent of the state’s oil and gas tax collections. None of the money can be spent until 2017, and only then if the Legislature decides by a two-thirds vote to dip into it.

Natural gas production in the big Marcellus Shale formation underlying parts of West Virginia and other nearby states has been rising even faster than energy experts predicted. That production in West Virginia alone nearly doubled in the past five years and could nearly double again in coming years, they say.

But some are taking a wait-and-see approach.

Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said the proposal to divert money into a fund that is untouchable for years comes at a time of a shrinking state budget.

“In theory, I’m not sure how anyone could not support leaving something for their children and grandchildren,” he said. “The problem is that we are looking at budget deficits in West Virginia.”

The oil and gas industry also worries that talk of creating a permanent fund could veer onto another subject, such as tax rates, DeMarco said.

Ted Boettner, executive director of the West Virginia Center on Budget and Policy, estimates that an oil and gas trust fund started now could accumulate $2 billion to $4 billion by 2040 if it weren’t tapped. But that wouldn’t be politically practical, he said, adding that the fund would probably need to be accessible within five to 10 years to build public support.

Kessler is leaning toward presenting the trust fund as a proposed constitutional amendment at the legislative session that begins in January.

Times Dispatch