Wyoming Lawmakers Scramble to Work Out Kinks in New Tax Law
By Camille Erickson
November 22, 2020 - Wyoming officials responsible for collecting taxes from mineral producers have faced logistical challenges rolling out a new law introduced earlier this year. Its aim is to make tax delinquencies, primarily from coal mine operators, a thing of the past.
The new law requires energy firms in Wyoming to fork over mineral tax payments to county governments on a more frequent, monthly basis, with a significant transition period built in to help companies get on board with the new system. Requiring firms to pay on a monthly basis would eventually help prevent local governments from facing huge budget shortfalls when operators miss a payment.
But the road to implementing the new tax rules has been bumpy for public officials and industry alike, according to an update provided to the Legislature’s Joint Revenue Committee on Thursday.
When local governments started to implement the new law, confusion cropped up over which government agency would be responsible for rolling out the new tax system: Should it be county treasurers or the state’s revenue department? The bill didn’t offer a straight answer.
After some discussion, county treasurers and assessors stepped up to collect the payments and implement the complicated new payment timeline for operators. That required overhauling county tax collection systems and sending thousands of notices to taxpayers.
“It was quite an endeavor that affected 22 of the 23 counties, since that’s how many have some sort of mineral production,” Converse County Treasurer Joel Schell said of the transition.
Then another layer of questions flared up: Will companies choose to follow the new schedule if there’s no penalty or interest charged for doing otherwise? How will billing be handled next year? Why haven’t parts of the new payment schedule been codified in tax statute yet?
“It creates a huge amount of confusion,” Department of Revenue Director Dan Noble said. “I think that the issues that we’re facing with this bill is that it came out so quickly. I don’t know that anybody really has had enough time to digest how it would dealt with.”
At Thursday’s meeting, the committee voted to draft two additional bills to fix these lingering issues. Lawmakers plan to hear public comment on the proposals at a Dec. 17-18 meeting.
“While the schedule works right now, it certainly needs some adjustment,” Noble continued. “Obviously one of them is to ensure that those payments are made on the schedule that was provided, because obviously it was there for a reason and that was to get people used to making these payments.”
Some of Wyoming’s counties have been in a fight to require energy companies to pay their ad valorem taxes more regularly, to avoid racking up huge amounts of debt if a company misses a payment. Ad valorem taxes are the dues county governments charge mining and drilling companies for extracting natural resources, usually collected every 18 months.
Between 2009 and 2019, mineral production tax delinquencies totaled over $100 million, according to data compiled by the Wyoming County Commissioners Association. The revenue generated through these mineral production taxes have proven critical to residents throughout the Equality State, providing billions of dollars to schools, roads and other essential public services. But not every company has paid up.
For the better part of the past decade, lawmakers have wrestled with the task of amending the tax rules to help avoid the back up in late payments. During the Legislature’s session this March, lawmakers found some common ground and revised the tax program. The new rules would gradually, over several years, introduce a more frequent payment schedule for energy companies and help eliminate the lag between when production occurs and when taxes are settled.
But there’s still some ways to go before the new system is perfected.
“I think the biggest issue is that we need to make it so that it can be administered in a fashion that achieves the goals that the bill was trying to achieve,” Noble said.
Noble recommended revising the bill to collect both the county taxes and state taxes levied on mineral producers on a monthly basis for current production on a monthly basis.
Recovery from the economic fallout fueled by the COVID-19 pandemic remains slow but steady in Wyoming, according to a report released by the state’s Economic Analysis Division last week. The total amount of sales and use taxes collected from the mining sector lagged far behind last year’s volume, by nearly 69%, exposing just how brutal the pandemic has been for Wyoming’s mineral industries.
Oil & Gas
Gov. Mark Gordon has officially launched an economic stimulus program aimed at boosting the state’s struggling oil and gas industry as it recovers from the economic collapse of energy markets this year. The Wyoming Business Council released the guidelines for the Energy Rebound Program on Monday. Applications will stay open for one week. More information is available at wyomingbusiness.org/ERP.
Wind & Solar
The future of the Equality State’s relationship with renewable energy development remains murky as federal wind production tax credits expire, cutthroat market conditions stall projects, and the state’s tax conditions remain far from stable. Despite this year’s boom in wind, few new projects are coming down the pike next year. It’s true, some companies have announced plans to install wind turbines here in the coming decade, but none are assured. The uptick in wind development here could peter out soon, some developers predict.
Wyoming lawmakers advanced a bill this month to ask the Public Service Commission to amend how the state regulates residential solar or wind energy. The bill was introduced on Wednesday during the third day of the Legislature’s Joint Corporations, Elections and Political Subdivisions Committee. The legislation prompts the Wyoming’s Public Service Commission — the state agency tasked with keeping electrical rates affordable and reliable for customers — to assess the state’s current net metering system.
Sen. John Barrasso, who chairs the Senate’s Committee on Environment and Public Works, introduced bipartisan legislation last week to boost domestic nuclear energy infrastructure and technology. Part of the bill could help Wyoming’s uranium industry by creating a national uranium reserve, supporters say.
“Russia has flooded the global uranium market with cheap nuclear fuel. This costs jobs in Wyoming and undercuts our producers,” Barrasso said. “America can never again be dependent on our adversaries to fuel the nuclear plants to power our homes, businesses, and critical infrastructure.”
Public Land & Conservation
The U.S. Bureau of Land Management published a plan to roll back some protections for sage grouse in the West, including Wyoming. The move was met with outcry from environmental groups who fear the relaxing of restrictions will open up public land to mining and drilling.
A federal judge admonished the Trump administration yet again in a court opinion for failing to adequately assess how leasing public land to oil and gas developers could negatively affect the climate. The U.S. District Court for the District of Columbia ruled the Bureau of Land Management neglected to properly weigh the impacts of climate change when conducting its environmental review tied to 304,000 acres of leased land in Wyoming. In the decision rendered this month, U.S. District Judge Rudolph Contreras called on federal regulators to conduct its environmental analysis again before drilling could be occur.
Quote of the Week
“As a regulated utility, we have to provide the lowest cost generation available for our customers. We are truly fuel agnostic. It is what makes sense for our customers.”
— Sharon Fain, Rocky Mountain Power’s vice president for Wyoming