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Coal washing tax deduction debated as Signal Peak supporters urge extension, opponents call it an unnecessary subsidy
Summary
House Bill 858 would extend a coal washing severance-tax deduction; proponents representing Signal Peak Energy and local governments said the deduction supports jobs and state revenue, while opponents called it a business expense and urged letting the incentive expire.
Representative Brewster introduced House Bill 858 to extend a coal-washing deduction in the state coal severance tax code.
Proponents — including counsel Charles Denow for Signal Peak Energy, George Harris of the Montana Coal Council and local officials such as Roundup Mayor Sandra Jones — said the deduction recognizes the value-adding effect of washing coal, which increases mine sales prices and downstream tax and royalty revenue. Denow presented federal Energy Information Administration data showing volatility in mine-sale prices and cited the federal regulation (30 CFR 1206.258) governing coal-washing allowances for federal royalties, arguing for consistency between federal and state treatment.
Supporters told the committee the Signal Peak washing plant represents a major local employer and tax base for Musselshell County and that extending the deduction is necessary to keep the plant operating and preserve jobs and local revenues. They asked for removal of an upcoming sunset provision or at least an extension.
Opponents said the deduction is a routine business expense, not a special subsidy, and noted that underground coal has a different severance tax rate than surface mines; they urged letting the existing incentive sunset. One opponent asked whether the mine’s reported large severance-tax payments ($60 million in 2024, cited by a proponent) and fiscal notes showing an additional $884,000 estimated fiscal impact in FY2026 made the credit unnecessary.
Department of Revenue staff participated as informational witnesses and discussed the tax accounting and implementation details; committee members pressed proponents and DOR for contract sales-price and severance-tax numbers and for clarification of fiscal note methodology.
Why it matters: HB 858 would affect Montana coal severance tax calculations and has localized economic implications in mining communities; fiscal estimates in the hearing showed a measurable but not state-budget-busting cost to extending the deduction.
What’s next: Committee will consider the bill; sponsors asked for a two-year extension to allow further discussion and to invite company officials for more detailed financial testimony.
Quotes "It turns out we copied this from the federal government. This washing allowance is used in the calculation for federal coal royalties," counsel Charles Denow said, citing federal regulations. "This tax exemption serves as kind of a payback for their investment," Roundup Mayor Sandra Jones said of Signal Peak Energy’s washing investment.
Ending Committee members asked proponents to provide additional contract-price and severance-tax detail for further consideration; proponents asked the committee to consider at least a short extension to avoid disrupting the mine’s planning horizon.
