Presentation of

Robert E. Murray
Chairman, President and Chief Executive Officer
Murray Energy Corporation

Does the West Virginia Government Want to
Retain What Is Left of the State’s Coal Industry
and the Jobs In It?

Before the
West Virginia Coal Association
43rd Annual Mining Symposium

January 27, 2016
Charleston, West Virginia

 DOES THE WEST VIRGINIA GOVERNMENT WANT TO
RETAIN WHAT IS LEFT OF THE STATE’S COAL
INDUSTRY AND THE JOBS IN IT?
Thank you for the invitation to speak today to the West Virginia Coal
Association’s 43rd Annual Mining Symposium.
My remarks are entitled “Does the West Virginia Government Want to
Retain What Is Left of the State’s Coal Industry and the Jobs In It? If it does, then
the West Virginia coal severance tax must be reduced from five percent (5%) of the
gross sales price of its coal to no more than two percent (2%) very quickly.
Political platitudes and lip service regarding the importance of coal jobs in
the State and support for them will not save these family livelihoods this time.
Only immediate action to reduce the State’s tax on coal extraction will help protect
them. Further, it must be the reduction to the five percent (5%) of the coal selling
price severance tax, not just to the elimination of the $0.56 per ton tax added on to
bail out the state’s workers’ compensation fund, which tax will end anyway when
the Governor certifies that the fund is solvent, which we believe should be at the
end of this month. We propose that the current 0.35% of the coal selling price going
to the counties in the two percent (2%) proposed tax will remain.
Unfortunately, past West Virginia leadership carried the State’s finances on
the back of coal. The industry now pays sixty percent (60%) of the State’s business
taxes through the five percent (5%) severance levy, together with the utilities that
burn the coal, and real property, sales and use, payroll, commercial activity,
personal property, and income taxes. Based on its seven percent (7%) contribution
to the State’s Gross Domestic Product, coal pays ten (10) times its fair share.
But, as Governor Earl Ray Tomblin correctly said two (2) weeks ago
regarding coal, “it is time to recognize an unprecedented shift in West Virginia and
the United States.” He also said, “West Virginia is ready to cash in on that
substantial IOU”, referring to coal’s service to the state for generations. But, it
must be through a reduction of three percent (3%) of the selling price, not just the
$0.56 per ton that he has proposed.
On New Year’s Eve, Murray Energy Corporation (“Murray Energy”) made a
$7,562,542.69 coal severance tax payment to West Virginia and simultaneously was
forced to lay off another six hundred seventy-four (674) employees, the vast majority
in West Virginia, from high paying, well-benefited jobs. Is the State’s government
going to continue to force these actions on its coal producers?
We all know that America’s and West Virginia’s coal industries and markets
are being destroyed by the increased use of natural gas to generate electricity and
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 by the war against coal by President Barack Obama and his appointees and
political supporters. With the present high rate of taxation, West Virginia coal is
not competitive with that from other states in the remaining distressed coal
marketplace.
Coal is sold regionally in the United States due to the transportation costs to
our electric utility customers. Let us look at the rate of coal severance taxation in
the states with which West Virginia production competes:
Alabama
Illinois
Indiana

$0.335 per ton (W.Va. coal minimally competes
with them).
No tax (W.Va. coal directly competes here).

Pennsylvania

No tax (W.Va. coal minimally competes with
them).
4.5% of the selling price (W.Va. coal minimally
competes with them).
$0.15 per ton (deep) (W.Va. coal directly
competes here).
$0.10 per ton (deep) (W.Va. coal directly
competes here).
No tax (W.Va. coal directly competes here).

West Virginia

5.0% of the selling price plus $0.56 per ton

Kentucky
Maryland
Ohio

On an assumed low state average of $45.00 per ton, f.o.b. Mine, price for
thermal coal, the West Virginia severance tax amounts to a very high $2.81 per ton,
which is unbearable in today’s coal markets.
As can be seen, West Virginia coal must carry this $2.81 per ton cost burden
in competing with neighboring states where, except for one, there are virtually no
coal severance taxes. Indeed, three (3) of the states with which West Virginia
directly competes, that is, Pennsylvania, Illinois, and Indiana, have no coal
severance tax at all, and Ohio’s is only $0.10 per ton.
There are currently forty-nine (49) bankrupt coal companies in the United
States. Twenty-seven (27) of them are in West Virginia.
The prestigious McKinsey and Company just issued a study showing that, as
whole, the United States coal industry is not only bankrupt, but that it also lacks
$45 billion in funds needed to cover its debt and employee-related and reclamation
liabilities. Remember, in 2008 President Obama said that he would “bankrupt”
coal. He, his political supporters, radical environmental groups, such as the Sierra
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 Club and Easter Seals, and liberal elitists, such as former New York Mayor Michael
Bloomberg, have made good on this.
It is important to emphasize that any benefit from any coal severance tax
reduction will not accrue to Murray Energy, but will flow directly to our electric
utility customers through the language in our existing and future sales contracts.
But, every penny of this reduction will make West Virginia coal more competitive
with that from other states and against natural gas, and thus help to preserve the
industry and its jobs.
This past April, and ever since, for the first time in American history, more
electricity was generated from natural gas than from coal. We are competing
against $1.40 per million Btu natural gas in the northern panhandle, and it has
been as low as $0.89 per million Btu’s at times. Six (6) proposed new gas-fired
generating stations, one (1) in Marshall County, two (2) in Brooke County, one (1) in
Harrison County, and two (2) in eastern Ohio, will create only 180 gas plant jobs,
but will destroy 1,548 more coal mining jobs. It is unbelievable that the local
politicians at these sites and some members of the West Virginia legislature have
approved or supported these plants, where gas plant promoters have been given ten
(10) year tax abatements to destroy coal and local coal mining jobs. Coal producers
have had no such tax relief in West Virginia. Also, the State is approving the
permits for these 8.6 to 1 job destroying plants.
President Obama and his appointees and supporters have now closed 411
coal-fired generating units, previously producing 101,000 megawatts of electricity.
His so-called Clean Power Plan will close an additional 49,000 megawatts of coal
generation, while increasing wholesale electricity costs by $214 billion in only eight
(8) years and increasing rates to up to thirty-one (31%) in half of our states. This is
why Murray Energy has filed six (6) lawsuits against the Obama Environmental
Protection Agency and their Destructive Expensive Power Plan. We have been
joined in this litigation by twenty-seven (27) of our states, including West Virginia.
Attorney General Patrick Morrisey has been a leader in this effort, and he has
demonstrated that he has been on of the State’s best supporters of coal and its jobs.
American coal production is now down from 1.2 billion tons per year to less
than 800 million tons annually. We project that it will further fall to 650 million
tons per year. The impact on West Virginia will be greater, with State production
forced down to about 75 million tons annually.
According to recent, expert studies by a major accounting firm, every coal
mining job in West Virginia is responsible for $1.2 million in economic output and
$656,000 in gross domestic product in the State. This is based on the very low
multiplier used by the West Virginia Coal Association of 3.6 secondary jobs created
by each coal mining job.
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 This multiplier assumes that, for every one hundred (100) direct West
Virginia coal mining jobs, there are an additional sixty (60) jobs required to
transport the coal by barge, truck, and rail. Another eighty-six (86) jobs are needed
to support the coal and transportation jobs, such as equipment sales and repair,
financial, legal, accounting, mine food supply, and security services, as well as all
energy requirements, including electricity and liquid fuel. Moreover, these workers
use their paycheck to buy all sorts of goods and services for their families. This
creates another 114 jobs, making a total of 360 positions for each 100 mining jobs.
Murray Energy uses an eleven (11) to one (1) multiplier of secondary jobs for
each coal mining job. Using an average of the 3.6 and 11.0 multipliers yields 7.4
secondary jobs for each mining position. This produces an economic output of $6.3
million per coal mining job. Thus, depending on the assumed multiplier, at the very
lowest, each coal miner generates a minimum of $1.2 million in economic output
yearly, and, at the assumed average, $6.3 million in annual economic activity.
The impacts of our proposed three percent (3%) coal severance tax reduction
are further attractive because, for every one hundred (100) million tons of current
production, long term coal demand will increase by three (3) million tons. (three
percent (3%))
Using projected calendar year 2016 data, and based on a projected West
Virginia coal output of 81,790,678 tons, the actual coal severance tax reductions,
counting both the three percent (3%) of the selling price and the $0.56 per ton
workers’ compensation bail-out add-on, will amount to $131,154,238 in tax relief for
the beleaguered West Virginia industry. Using current census data, it has been
determined that 1,261 coal mining jobs will be preserved. Using the conservative
7.4 secondary to one mining job, yields the preservation of 9,332 jobs in the State. If
Murray Energy’s historically used ratio is applied, the result is the salvation of
13,872 West Virginia family livelihoods.
In fiscal year 2014, coal provided sixty-three percent (63%) of the severance
tax in the State. But, natural gas is rapidly replacing coal use in electric power
generation. Should this not be examined?
Through June 30, 2014, the coal industry paid $8,981,805,714 in taxes to
West Virginia. It is an outrage that past West Virginia leadership has operated the
state by so penalizing coal, while not taxing alcohol, cigarettes, and trial lawyer and
other services even close to the extent that exists in other states. As an aside, I
have learned that West Virginia’s reputation as a tort lawyer “hell hole”, is an
understatement. Much more tort reform is absolutely necessary so that the State’s
businesses are not further extorted by trial lawyers who attempt to make up the
facts, concoct their scenarios, and take their huge percentages of the blackmail.

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 The West Virginia rainy day fund has grown, and the coal industry
accomplished this. But, the actions of the Obama Administration and his
supporters in their war on coal, and the increased use of natural gas to generate
electricity, are fatally “storming” on coal.
The very high and unfair West Virginia coal severance tax is penalizing coal
producers, exacerbating Mr. Obama’s war on coal, and destroying high paying, wellbenefited jobs in the State. It is also yielding an unstable and untenable tax base
for West Virginia.
The proposed severance tax reduction is the difference in making a coal sale
or not. This reform will also extend the economic life of West Virginia’s coal-fired
generating stations.
West Virginia leadership can now, and must, address this issue in a
proactive, constructive way that will help save what is left of its coal industry and
jobs. If our leadership chooses to not address this crisis by keeping the current
penalizing tax structure in place, and addressing only the $0.56 per ton that is
about to go away anyway, this will not be even close to what is needed, and no
government official can further state that he or she support coal mining families. It
takes government will to see that the State’s coal industry is not further destroyed.
Remember, we have the coal reserves to see that our jobs last over 200 more
years. But, West Virginia coal must be competitive with other states, and it is not.
Even at a two percent (2%) severance tax rate suggested, the coal industry
will still be paying West Virginia at a rate of at least $0.90 per ton, even on an
assumed low coal price. This is against our surrounding states, which have no such
tax at all.
Recent expert studies show that modernizing West Virginia alcohol, tobacco,
and professional service taxes can replace the lost coal severance tax revenues.
Broadening the tax base by eliminating the sales and use tax preferences and
exemptions for professional services, including legal, medical, accounting, and
others, will also help.
Further, eliminating waste in the State will also offset the reduced coal
severance tax. An independent group has already claimed that it has identified
over $300 million annually in such waste.
Recent studies show that tax reform could be very beneficial to West
Virginia’s senior citizens by excluding the taxation on social security income. It will
eliminate the unfair tax breaks for many of our state’s services, and particularly
lawyers. It will improve the health of our state’s residents by increasing tobacco
and alcohol excise taxes.
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 Ladies and gentlemen, this critically needed tax reform is a human issue to
me. You see, I know the names of most of our employees whose jobs and family
livelihoods are at stake.
Our employees do not want Hillary Clinton’s proposed “expansion”
(her word) of the Obama policies toward coal or her proposed $30 billion in welfare
to support West Virginia communities after their jobs are destroyed. They only
want to work in honor and dignity.
I have performed most of our miners’ jobs in my career, and they have
difficult days. They certainly deserve your immediate support, as we have
proposed. I am not giving up on the West Virginia coal industry or the people in it,
nor should any of you. But, we must enact the proposed immediate tax relief to
preserve what is left of it.
Thank you.
MURRAY ENERGY CORPORATION

Robert E. Murray
Chairman, President and Chief Executive Officer

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