Funding for certain projects may be short lived with pending drastic cuts in coal severance funds.
At a meeting of the Harlan County Fiscal Court on Thursday, Harlan County Judge-Executive Joe Grieshop said coal severance funds may be cut as much as 50 percent for the upcoming year.
“The trend will probably put us down 35 percent over the year before this last quarter,” said Grieshop. “We’re down 15 percent already. There is a lag time between production and coal severance tax, so it takes awhile for the volume to begin to drop on the severance tax. The first six months of this year, 8,100 megawatts of power came on line in the United States and 80 percent of that was natural gas. One was a coal-fired power plant. We’re facing a terrible battle that will probably be more on the permanent side rather than a dip and a rise.”
In 2011, 32 percent of all the power in the United States which came on line was from wind turbines, Grieshop said.
“So, you can see where lots of parts of the United States are using wind as a power source,” said Grieshop. “In Harlan County, we have a great deal of mercurial coal, which is still realizing a pretty strong market. A lot of it will go out of the country. We compete with western Kentucky and western United States coal which is mined at much reduced costs. When it gets on the rail it has lower costs and that’s the coal which will have the lowest bid for steam. We have a lot of competition on coal itself and other sources of electrical production.”
Grieshop said Harlan Countians can “bank on” a 35-percent cut in coal severance funds this year and next year it could be as much as 50 percent cuts.
“It will go from $3.2 million in local government economic development to $1.6 million,” said Grieshop. “That’s project money. The local government economic assistance, which is the quarterly checks we get, will go to $1.5 million.”
Magistrate David Kennedy said he is being asked if projects already approved will be affected with the decline in coal severance funds.
“These projects will be funded as the money comes in,” said Kennedy. “The projects are still there, the coal severance money has dropped and will continue to drop until Lord knows what happens.”
Grieshop said no project is confirmed until it is under contract. He said no project will be under contract until the coal severance money is in place to fund them.
“The money has to be there first. Second you have to meet all the commitments of the scope of the work. And, thirdly you have to follow what you said,” Grieshop said. “There are some people who will not meet the criteria because the way the line item law was written — so they won’t qualify. It’s unfortunate, but it does happen.”
Grieshop said that according to the Department for Local Government, cities in the county will now handle their own coal severance funds. He said it will not go through the fiscal court.
“The cities will be in direct contact with the state,” said Grieshop. “They have all received letters telling them this.”
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