Land Tenure Center Newsletter
Number 77, Spring 1999, p. 4-5
The Mountain Association for Community Economic Development (MACED) completed a study showing that companies in a key coal mining county in Kentucky are taxed on less than half of the value of their coal reserves. The study, which was funded by the LTC’s North American Program (NAP), argues that the same is likely true of all coal producing counties.
The MACED report found that while annual coal production in Letcher County since 1977 has increased from 4.7 million tons 
to 8.4 million tons, the Kentucky Revenue Cabinet (KRC) projects a marked decrease in coal production. This contradicts the trend in the county and will result in an annual loss of approximately $600,000 in taxes that would be used by county schools, government, and other local taxing districts.
The KRC both assesses coal reserves and estimates production by using a method that relies almost solely on self-reporting from the coal owners. In 1997, reports from coal owners caused the Revenue Cabinet to estimate that 128 million tons of coal would be mined in the state and taxes were assessed accordingly. At the end of the year, coal owners reported that they had actually mined 151 million tons. The tax lost due to this discrepancy—approximately $470,000—cannot be recovered. As reported in local newspapers, the commissioner of the 
state KRC’s property valuation office, which relies on the self-reporting of coal companies, called this discrepancy, “Not too bad.”
The lost funds in Letcher County in 1997 were from coal that is mined; unmined coal is also taxed and subject to the same method of self-reporting. An independent assessment of coal resources and valuation by a Pennsylvania consulting firm, Resource Technologies Corporation (RTC), resulted in findings similar to, and actually slightly higher than, those of the MACED study. Projected across Kentucky, such under-reporting might be resulting in millions of dollars of lost revenue.
Major funding for the study, called An Examination of Coal Resources and Revenues for Letcher County, KY, was provided by NAP. Don Harker, president of MACED and one of the authors of the study, said that it was prompted by a perception that the coal resources in the region were soon going to run out. MACED wished to help the county plan for the time when the nonrenewable resource stopped providing jobs and revenue. In trying to determine when the coal resources would end, however, MACED quickly found that there were approximately 37 years of mining remaining at current mining rates, as compared to the KRC’s estimate of 17 years. Since unmined coal is taxed on future rates of mining, this lower estimate by the Revenue Cabinet results in further lost revenue to the county.
Coal production has generally increased in Letcher County since its inception in 1912. Surface mining started in 1945, and since that time, the amount of coal extracted by surface mining techniques has increased markedly.
Yet the study found that coal production in the county is providing fewer benefits to the citizens. Jobs for miners have decreased from 2,596 in 1977 to 981 in 1996, and 2 individuals and 16 corporations own two-thirds of the total land in the county.
The findings in the MACED study have helped in lawsuits brought by county officials to recover revenue from coal companies; MACED plans to do a similar study in another Kentucky county.
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Copyright © 1999 by Land Tenure Center and Board of Regents, University of Wisconsin. All rights reserved.
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