Tax & Fiscal Policy

Wyoming Coal Train, photo courtesy of EquipoiseFund.orgThe ESPC represents the public interest on taxation issues in Wyoming, particularly on mineral taxation. One day, Wyoming’s finite energy/mineral resources will be gone or no longer economically recoverable; we advocate for responsible stewardship in the form of severance tax rates that capture the value of these resources for the future.

We worked to get the regressive sales tax off groceries and support targeted property tax relief. We also work to improve Wyoming’s complicated revenue distribution system and budgeting process.

Severance taxes

Mineral taxation has long been a contentious issue in Wyoming, going back to territorial days. A severance tax was discussed at the state’s constitutional convention, but was not enacted until 1969. In 1974, Wyoming voters amended the constitution to create the Permanent Wyoming Mineral Trust Fund, funded by a one and a half percent severance tax on all minerals extracted in Wyoming. Additional severance and property taxes on mineral extraction fund numerous other programs and services.

Wyoming state and local governments depend heavily on mineral tax and royalty revenues. The ESPC has continually advocated for higher severance taxes, thinking of the future when these nonrenewable resources will no longer be generating tax revenues.

In 2000, the Department of Economics and Finance at the University of Wyoming conducted a study for the Legislature to look at how raising or lowering severance taxes would affect jobs and production. The study concluded that lowering severance taxes would have only a minimal effect on jobs or production, but would have a huge negative effect on state revenues; similarly, severance tax increases would reap substantial tax revenues while not endangering jobs.

The ESPC joined with progressive organizations in other Western states to produce a report comparing mineral taxes imposed in each. Read the ESPC press release.

Latest developments – Big Coal seeks tax cut

In the 2011-12 interim between legislative sessions, the coal industry proposed changes to the formula used to establish the value of coal production, changes expected to reduce the severance taxes paid by the industry in future years. The ESPC submitted written testimony opposing the changes to the Joint Revenue Interim Committee in August 2011. The committee adopted industry’s proposal, however, and its bill will be presented to the Legislature during the 2012 Budget session.

Royalties from trust lands

The Wyoming Board of Land Commissioners sets royalty rates on minerals produced from state-owned lands. Royalties reflect a property interest. Like private owners of mineral rights, the state collects royalties on its lands, mostly School Trust Lands, when coal, oil, gas, trona or other minerals are extracted.
The state generally imposes a royalty rate of 16.67 percent of the production value when it leases its minerals. The ESPC and its allies believe the rate should be raised to 18.75 percent, comparable to private royalty rates. Virtually all those royalty revenues flow to the Common School Fund to support Wyoming’s public schools. (Laramie County, leasing county-owned minerals, recently obtained an 18.75% royalty.)

Similarly, the board and the Office of State Lands and Investments should end or at least severely restrict royalty-free flaring of natural gas produced from state lands. The flaring issue will be discussed at the Board of Land Commissioners meeting in February. The ESPC has submitted written testimony.