House committee debates carbon offset contracts

Story by David Beard, The Dominion Post

CHARLESTON, W.Va. — A House bill aimed at protecting business of managed timberlands in the state by heavily taxing carbon offset contracts met with opposition on Tuesday from landowner groups that object to government interference in how they use their lands.

Evan Hansen

HB 3294 was before the House Energy and Manufacturing Committee. The bill’s lead sponsor is the committee chair and nine of its remaining 10 sponsors are committee members (the other sponsor is Speaker Roger Hanshaw).

Current code defines managed timberland as 10 contiguous acres devoted primarily to forest use with sufficient numbers of commercially usable tree species – with further details.

The bill excludes from the definition land subject to a carbon offset agreement with restrictions incompatible with commercial production and harvesting. Offset agreements may provide for non-development of land in order to prevent release of greenhouse gases, or to absorb or suppress greenhouse gases.

Parties entering into an offset agreement must register with the tax commission. Agreements that prevent development or substantially restrict severance of mineral or timber are subject to a 30% excise tax on the amount of the contract payment; agreements that do not restrict development are subject to a 15% tax.

Land contracted for underground carbon sequestration is not subject to the tax because that doesn’t prohibit development.

Contracts are limited to 20 years but may be renewed for another 20, subject to renegotiation of the terms.

David Zielonka, with the West Virginia Nature Conservancy, enumerated during the Q&A section some of the problems the Conservancy sees.

He explained that many landowners in its Family Forest Carbon Program work with a forester to manage their land. They are encouraged to harvest 25% of it, but are paid to maintain the rest. It’s a misconception that offset agreements tie up land for generations and have no-cut restrictions.

Maintaining it doesn’t mean not using it, he said. They may offer it for various recreational uses and make money that way. And the income from the carbon offsets and whatever uses they choose helps them maintain and hold onto their land.

The 20-year limit in the bill, he said, will run contrary to many other state laws that require 40-year contracts, limiting the ability of companies in those states from buying carbon credits here, and depriving landowners of income.

There are also constitutional problems, he said. It probably runs contrary to Fifth and Fourteenth Amendment protections on government takings without due process and just compensation. It also violates laws governing contracts between private parties.

Roy Cooper

“We estimate this would have a severe chilling effect on the market,” he said.

West Virginia Land and Mineral Owners Association Executive Director Michael Haid told the committee, “We’re all about having choices for our landowners.”

Many members have had their lands mined out. They want to offer it for solar development or recreational use, among other things. The sale of carbon credits is a relatively new revenue source for them and doesn’t restrict their ability to harvest timber, but this takes it away.

“We’re about responsible land management. We want to have options,” he said, They don’t want the government telling them what to do with their land.

Dwayne O’Dell, with the West Virginia Farm Bureau, told the committee some bureau members have offset agreements and oppose prior restraint on how they use their land.

Offset agreements offer an alternative income stream, he said, and bureau members don’t care for the government inserting itself into private contracts.

Delegate Evan Hansen, D-Monongalia, cited all those reasons for his opposition to the bill. He also said that it could hamper the ability of land trust organizations that enter into offset agreements to preserve land.

Bill supporters on the committee offered various reasons for their support. Committee chair Bill Anderson, R-Wood, was among those who said the 20-year limit will actually help landowners. Land values and contract prices can fluctuate and the limit spares them being tied into long-term or even perpetual contracts that yield far less than market value.

Delegate Roy Cooper, R-Summers and a co-sponsor, said we’ve seen a long history of government interference in contracts: tobacco, dairy, hemp, medical cannabis. This bill could help keep the state’s timber industry viable.

Members adopted two amendments to the introduced version of the bill. One removed the clause making it retroactively applicable to existing offset agreements. The other removed a provision making the landowner liable if the company or party buying the offsets fails to pay the excise tax.

The vote to approve the amended bill was 21-3 along party lines. It now goes to Finance.

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