No. 32528 - U.S. Steel Mining Company, LLC, Consolidated Coal Company, Laurel Run
Mining Company, McElroy Coal Company, Arch Coal, Inc., Mid-Vol Leasing,
Inc., Coastal Coal-West Virginia, LLC, Elk Run Coal Company, Inc., Paynter
Branch Mining, Inc., Kingston Resources, Inc., Pioneer Fuel Corporation v.
The Honorable Virgil Helton, West Virginia State Tax Commissioner
Albright, Chief Justice, concurring:
I write separately to make several points.
I commend the majority and concurring opinions for their careful, scholarly, and
principled analysis of a difficult issue. All of the members of this Court have acknowledged
that drawing appropriate and principled decisional lines in this area of law is not an easy task;
and these opinions have done so.
It is appropriate to emphasize that the State of West Virginia, through our courts,
our executive branch and our legislative branch, has a strong historic and present basis for
appropriate regulation of our coal industry for the protection of our land and people and to
promote the well-being of this industry which is a major factor in our state's economy.
Likewise, the state has good reason to fairly tax the privilege of removing its nonrenewable
natural resources from the ground, giving attention to the economic benefit gained by their
owners, to the substantial social costs incurred by our people and our state in the process, and to the need to support an economic and social infrastructure in which the extractive industries
can profitably operate.
I disagree strongly with the suggestion in the partially concurring and partially
dissenting opinion by Justice Benjamin, at footnote 11, that a workable test for in export
transit is whether there has been an irrevocable commitment of goods to the foreign market.
The problem with this test is that (as Justice Benjamin's separate opinion acknowledges), any
number of various events might be classified as such an irrevocable commitment. For
example, a mine might be opened with export coal production as its sole purpose, just as mines
have been opened solely or primarily to serve nearby electric generating facilities. Under the
suggested test, every ton leaving the coal face of such a mine could be said to be in export
transit from the moment of its separation at the face. In that situation, all severance taxation
could be said to be constitutionally precluded.
(See footnote 1)
Our Legislature drew on its extensive experience with the coal industry in
crafting severance taxes on coal mining. The lines the Legislature has drawn do not
unconstitutionally stray into the area of taxation of goods that are merely in export transit. In
fact, they are evenly applied to coal that may only move in-state, move in other domestic
commerce or move in foreign commerce. They are specifically tailored to avoid taxation of
any transit costs and to provide convenience to the affected taxpayers in the calculation and
payment of the taxes at issue in this case.
The Legislature's decision to base the tax on the selling price of the coal, less
actual transportation costs, has been criticized on the ground that it seeks to tax value added
after the coal has been severed from the ground. I respectfully suggest that the value added
argument is just plan erroneous. The long experience of the State of West Virginia in
ascertaining the value of coal has taught our state that there is no easy litmus test of
By way of example, a thick seam or a thin seam of coal may yield a product of
high or low heat value, with little or very high contaminants, slate, rock, methane or other
material mixed in. Calculation of value by weight (by ton) or by acreage prior to removal can
yield wildly divergent results, at substantial variance from the true value of the coal. Thus,
accurately measuring the value of the natural resource wealth being removed from the
ground in the exercise of the privilege of mining coal must be seen as a difficult task. I would
point out that the method chosen by the Legislature _ essentially the sale price of the coal less
any transportation cost _ is as fair and accurate a measure as can be devised. In any event,
calculation of the tax, based on value as defined by the Legislature, especially at the
relatively low rate specified by the law in comparison to rates imposed in other jurisdictions,
yields an eminently reasonable exercise of the state's taxing power. The further concession
by the Legislature that the tax need not be calculated and paid before a sale is had constitutes
an act of grace to the taxpayer and is a reasonable concession to the mining industry. This
mechanism avoids imposing the tax before there is an ability to pay and likewise avoids such
devices as paying estimates when the coal is shipped, subject to later adjustments when a
real value is finally determined by the actual sale in the marketplace and the actual
transportation costs are determined for deduction from the sale price.
Justice Benjamin's partially concurring and partially dissenting opinion
disapproves of any tax on the value added by the coal loading process in the instant case. But
the only value added in the loading of coal onto a rail car is the relatively minimal cost of the
mechanical act of scooping up and dumping the coal into the car. A tax on the cost of loading
is precisely what was approved in Washington Department of Revenue v. Association of
Washington Stevedoring Companies
, 435 U.S. 734, 758 (1978). In any event, the revenue
gained by this portion of West Virginia's severance tax must be recognized as being de
and incurred in some manner in every case, whether the coal is to be delivered in-
state, in domestic commerce or in foreign commerce.
Finally, the majority opinion gives full deference to the fact that the Richfield
test has not been explicitly overruled. The opinion notes that the future viability of such
a mechanistic test has been called into question by Michelin Tire Corporation v. Wages, Inc.
423 U.S. 276 (1976). Therefore, the majority of this Court properly also looked to the
approach, which all agree is supportive of the taxes in question.
Accordingly, I concur.
Coal mining and production methods can vary substantially, with loading,
blending, cleaning, and re-loading occurring in difference sequences. Recognizing this
situation, West Virginia tax statutes and regulations, as interpreted in Kanawha Eagle Coal,
LLC v. Tax Commissioner, 216 W.Va. 616, 609 S.E.2d 877 (2004), draw a bright-line
distinction at the completion of initial coal loading; which also, in the case of exports,
corresponds to the logical beginning of an in export transit process.