Reason for this is the impending surge in prices as coal soon becomes an international commodity shipped to countries like China and India.
Despite a black eye here in the USA due to its polluting capability, coal is in high demand all over the world, especially in growing economies.
It could be predicted that the biggest future opportunity for Wyoming coal is for it to be shipped out of Pacific ports to countries that are running out of locally produced coal.
Back here in Wyoming, coal severance taxes have not been raised in decades.
Gov. Matt Mead and the newly convened Legislators should at least look at what former Gov. Sarah Palin did in Alaska, in modifying that state’s severance tax rates.
My understanding is that the Alaska system involves indexing rates, which is what Wyoming should consider. As coal prices rise, so should the severance tax rate. As prices go down, so should the rate. This is fair and market-driven. With an outlook this promising, Wyoming citizens and future generations of Wyomingites will benefit greatly.
In Wyoming, coal is a very big deal. Our state is the largest coal-producing region in North America and supplied 40 percent of the coal used in the USA. Some 13 mines in Campbell County’s Powder River Basin generated 97 percent of this production.
My friend Jeff Wacker, the futurist for Hewlett-Packard from Dallas, tipped me off to this impending worldwide coal boom.
There are two huge international reasons to look at raising coal severance taxes right now. Both of these reasons are causing the prices for coal to rise and the demand to soar worldwide.
First is the rapid growth of economies in China and India.
China is building a new coal-fired electrical power plant weekly. Right now, that country imports some 60 percent of all the coal produced in Australia. Recently, coal prices increased by 40 percent in that country.
Even though China mines a lot of its own coal, it cannot provide enough to satisfy its needs for the power plants and for its vast steel-making facilities.
China’s economy is expected to grow four times as fast as the USA in 2011, and its demand for more coal is unrelenting.
India’s economy is also growing rapidly and relies on coal for both electrical power and for making steel. At one point in 2010, 17 coal-fired plants in India were down to a seven-day supply of coal on-hand, which is considered a huge security risk for that country.
More than 75 percent of India’s coal is imported from Indonesia. Its importing of coal from South Africa increased by 75 percent this past year.
Second reason is a series of catastrophes in the world that are causing a shortage of coal.
Australia has been battered by floods that have negatively affected two-thirds of its coal mining capacity. It will take time to restore the mines and the ports that were damaged by record rains and storms.
In Russia, a horrible accident killed over 60 people in one of the country’s largest coal mines.
It will cost $200 million and years to bring that mine back into production. Russia was a net coal exporter before the accident, but now may need to import coal.
With the above scenarios, we now see state leaders from Montana meeting with Pacific states about expanding ocean ports so more coal shipments can be made to those far-off countries. Wyoming industry folks are also in the thick of these discussions.
Meanwhile, here we are, back in a windy corner of Wyoming, watching our legislators and our world-best lobbyists mingle and settle in for the legislative session.
Should severance tax reform be on the table?
For years our lobbyists have managed to convince our legislators and our governors to leave this golden goose alone.
“If it is not broken, why fix it?” is the oft-heard refrain by lobbyists and lawmakers, alike.
Well, we are not saying it is broken. In fact our severance tax system is the envy of every other state, except Alaska.
But well-meaning and good-intentioned leaders need to take a long, hard look at this system soon. Today is not soon enough.
Check out Bill Sniffin’s columns and blogs at www.billsniffin.com. He is a longtime Wyoming journalist and author from Lander. He has a Facebook page for William C. Sniffin and his Twitter address is Billwyoming.