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Senate bill to remove sunset on coal-washing tax credit draws divided testimony on jobs, royalties and company profits
Summary
Sen. Mary Usher said SB 333 would repeal the sunset of a coal-washing deduction that allows mines to deduct washing costs from contract sale price; industry witnesses argued the credit preserves a premium product and local jobs, while environmental advocates urged trigger language or review of company profitability and local benefit.
Senator Mary Usher opened the hearing on Senate Bill 333, which would repeal the statutory sunset on a coal‑washing tax credit first enacted in 2009.
Senator Usher told the House Taxation Committee the credit lets mines deduct the costs of removing impurities through a washing process from the contract sales price; proponents said that deduction enables mines to produce and sell a premium product at higher prices, which in turn increases severance tax collections and supports local employment. Charles Denow of Signal Peak Energy, the operator of Montana’s lone underground mine, said the mine employs roughly 260 people and that coal washing is necessary to produce a premium product demanded by international markets. Denow told the committee the cost of the washing credit is about $3.85 per ton (an estimate in the fiscal note) and argued that eliminating the credit would make it unlikely the company could continue selling a washed product and could reduce contract sales prices.
Industry witnesses — including the Montana Coal Council, the Billings Chamber of Commerce and the Montana Association of Oil, Gas and Coal Counties — urged the committee to remove the sunset, saying the credit supports jobs, local payroll, royalty and severance revenues and community investments from mine-related funds.
An environmental advocate, Derf Johnson of the Montana Environmental Information Center (MEIC), questioned whether the company needs the credit given recent high seaborne coal prices and suggested trigger language tied to market prices could limit the credit when private returns are strong. Johnson urged the committee to ensure local communities receive proportional benefits and noted the fiscal note shows roughly 40% of related revenue flows to local governments; he estimated that at current note assumptions that equals about $200,000 annually to local governments and said he was skeptical of some fiscal-note assumptions.
Committee members pressed company witnesses for concrete numbers. Representatives asked about the contract prices for washed and unwashed coal and the company’s operating margins. Signal Peak representatives said washed product sells at premiums (they gave an approximate $15 differential in examples during questioning) and that margins vary with market conditions; they said when prices are low the mine struggles and the margin can disappear, which is a rationale for keeping the credit to provide certainty for the operation. Committee members asked for additional company financial details and operational costs; company witnesses offered to provide more data post‑hearing.
Department of Revenue staff attended as informational witnesses to answer tax‑policy questions. Testimony reflected a divide: industry and local government representatives emphasized jobs and local revenue, while environmental representatives urged trigger language, more fiscal transparency and scrutiny of windfall profits. The hearing closed with the sponsor and witnesses noting follow-up materials might be provided to the committee.
