Dan Neal of the Equality State Policy Center recently posted this opinion piece on its website regarding the severance tax, the fuel tax, and the need to find funding for Wyoming’s highways and roads:

New severance tax needed to support state highways

Roads support Wyoming people and industries

Gas tax hike alone will not solve state road funding needs

Should Wyoming impose a new severance tax on mineral extraction to help maintain its highway system?

The question was raised Aug. 23 by Senate Revenue Committee Chairman John Hines after the Legislature’s Joint Interim Revenue Committee voted to raise the state’s tax on gasoline and diesel fuel by 10 cents per gallon.

The hike, expected to raise about $48.15 million a year for the Wyoming Department of Transportation (WYDOT), falls far short of generating the sums needed to maintain the state’s highway system. The department estimates that it needs additional state revenues of $134 million annually, about $85 million more than the higher gas tax will provide for the WYDOT.

Altogether, the gas tax hike will generate nearly $72 million in additional revenues, but $16.77 million will go to the state’s 23 counties to maintain their roads and another $6.9 million will go to Wyoming cities and towns to maintain streets, according to figures from WYDOT.

After the committee voted to impose the 10-cent gas tax hike on July 1, 2013, Hines said there has been talk of either earmarking revenues from the state’s severance tax collections or imposing a new severance tax to make up the difference. Rep. Mike Madden, HD40, R-Buffalo, agreed that severance taxes are needed to supplement state fuel tax revenues. Sen. Cale Case, SD25, R-Lander, also agreed and asked that legislation be drafted as “a placeholder” for committee consideration prior to the 2013 session.

There’s a strong community of interest in maintaining Wyoming’s highways. Many groups, including the Wyoming Taxpayers Association, the Wyoming Trucking Association, the Wyoming Mining Association, Wyoming Friends of Pathways, the Wyoming County Commissioners Association, and the Wyoming Association of Municipalities, supported the fuel tax increase. All of them know the fuel tax can’t meet the need. And the Revenue Committee said it does not believe it can raise the tax enough to meet state needs. They pointed out that the increase in Wyoming’s tax to 24 cents per gallon of gasoline keeps the state in the market range of surrounding states. Montana’s gas tax is 27 cents per gallon.

Earmarking existing revenues will either take funds from other state programs or will mean the state will reduce the amount of money going into its Permanent Mineral Trust Fund. The state should not reduce its commitment to future generations of Wyoming residents.

So a new severance tax aimed specifically at addressing highway needs makes sense. The energy industry depends upon the state’s transportation system to move its people and equipment. We’ve all encountered fracking trucks, rigs being moved, and extra-wide trailers hauling gas plant equipment or pipeline compressors while driving around the state. They’re big and we know all that weight wears out roads.

Moreover, the fossil fuel industry has a stake in making certain that all those gas-driven or battery-powered cars of the future have good roads to run on. An investment in state roads simply represents an investment in the energy industry’s future.

The new severance tax bill should be accompanied by legislation to generate more revenues from Wyoming’s wind resources, as well. The wind industry’s stake in our roads is just as significant as any other business’s interest.

Wyoming originally imposed severance taxes to mitigate the impacts of energy and other minerals development and to capture the value of Wyoming’s mineral assets for future generations. That’s why we have a Permanent Mineral Trust Fund.

The taxes have not been raised in years, and, in fact, the tax rate has declined for coal. It’s high time we started talking about the proper role of severance taxes once again.

Dan Neal
Equality State Policy Center

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Published on September 4, 2012

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