Feds can restrict flow of mineral revenue to Wyoming

Surface subsidence effects

Surface subsidence effects above abandoned coal mines north of Sheridan, Wyoming. The battle over the federal budget threatens the billions in funding Wyoming receives for mining reclamation. (Courtesy of the U.S. Geological Survey – click to enlarge)

 
An Essay by Samuel Western

It pinches our conscience. And it makes us fear for the future.

Congress established the Abandoned Mine Reclamation Trust Fund (AML) to pay clean-up costs for abandoned coal mines nationwide, not to build agricultural facilities at Sheridan College and new classrooms at the University of Wyoming, which is what has happened. It takes a few drinks, but adherents of even modest fiscal responsibility will admit that AML funding has strayed far from its intended purpose.

Wyoming’s delegation has won some impressive battles in getting AML money back to their state, but their odds of winning the war grow increasingly slim.

For example, the FY2013 Continuing Resolution passed on September 13th includes a permanent reduction to Wyoming’s share of the AML trust fund. The fund is fed by a tax on coal, and much of those taxes come from Wyoming coal, but Wyoming is now getting less and less of that money back for local projects.

Rep. Paul Ryan

The budget plan submitted by Rep. Paul Ryan (R-Wisconsin) last year would’ve cut all AML funding for Wyoming. The current Continuing Resolution in the legislature would permanently reduce the state’s AML funding. (Talk Radio News Service/Flickr – click to enlarge)

The irony is, however, that all three Wyoming delegates, Senators Mike Enzi and John Barrasso and Representative Cynthia Lummis, voted for the budget proposal submitted by Rep. Paul Ryan (R-Wisconsin) – now the GOP vice-presidential nominee.

Ryan’s budget proposal — otherwise known as the House Congressional Resolution 112 — would, if it had passed, have stripped Wyoming of all AML funding. “Terminating,” actually, was the word the resolution employed.

Thus, this isn’t really a story about the AML. It’s about the reluctance of Wyoming – and the Wyoming delegation – to accept a new political reality: revenue from minerals, such as AML money, is easy to snatch and Congress will probably use it for whatever it pleases. The dilemma also reveals Wyoming’s one-dimensional sense of entitlement. It’s our money, we yelp, and we want it back. Now.

The reality is that over the years, Wyoming has received tens of billions of non-mineral related money from taxpayers who don’t live in the Cowboy state. In the trade-off department, Wyoming has gotten an awfully good deal.

The old era is fading. What were once Wyoming plums are now low-hanging fruit for a cash-strapped Congress to pluck for other purposes.

But the federal budget crunch is not the only reason for the change: as Congress has succumbed to partisan polarization, the Wyoming delegation has lost the capacity to work across the aisle. It is worth remembering that it was always bi-partisan work in Washington that got Wyoming those plums in the first place.

If the partisan divide only widens, Wyoming’s delegation may now find it harder and harder to bring home a bountiful harvest from Washington.

And since Wyoming has long depended on that bounty – reaping billions  (just look at what Wyoming received in federal mineral royalties in 2011) federal money, for everything from highways to healthcare, for every dollar Wyoming sends to Washington – the result may not be one that pleases Wyoming.

The angst over AML money illuminates the dilemma. But first, a little background on AML.

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The legislation creating the AML trust fund, the Surface Mining Control and Reclamation Act of 1977 (SMCRA) mandated that all coal producers contribute to a trust that would pay for cleaning up old coal mines.

This automatically stacked the deck against Wyoming. Strip mines, then fast becoming the state’s sub-bituminous revenue machine, got dinged the hardest: $.35 per ton (underground mines only paid $.15 per ton). Moreover, Wyoming was climbing to the top as the nation’s lead coal producer. The math was easy. The more coal you produce, the more you contributed to the AML fund. Wyoming coal mines have contributed, thus far, over $3 billion to the AML trust, by far the largest amount of any state.

But, as everyone knew at the time, other states had far more abandoned coal mines needing clean up than did Wyoming. The equation got discouraging when, by 1984, Wyoming had reclaimed all of its abandoned coal mines. States like Kentucky and West Virginia, however, had thousands of mines begging for reclamation. They still do.

Coal extraction at a strip mine in Powder River, Wyoming

Coal extraction at a strip mine in Powder River, Wyoming. Because of the dues incurred by the state’s large number of strip mines and it’s growth as a coal producer, Wyoming has contributed more money to the AML trust than any other state. (Courtesy of the U.S. Geological Survey – click to enlarge)

Yet key language in SMCRA protected Wyoming. It guaranteed that fifty percent of all taxes collected from coal mines would be returned to the state of origin. Wyoming politicians began tweaking and amending SMCRA reclaim abandoned hard mineral operations, like old uranium mines for example.

Yet, anticipating that there were also not enough hard rock reclamation jobs to ensure Wyoming would get back its share of the AML funds, Wyoming’s delegation in Washington (which at the time was Senators Alan Simpson, Malcolm Wallop and Congressman Craig Thomas) put in language in 1990 reauthorization of SMCRA that made any community impacted by mineral mining a possible recipient for funds. This included funding public facilities.

The floodgates opened. AML money started funding Wyoming water projects, hospital additions, and vocational training centers.

The University of Wyoming in particular raked it in. UW has received more than $200 million in AML-related funding for research in cleaner coal technology, engineering and overall energy research. This includes a 2007 $50 million appropriation for building the Michael B. Enzi STEM (science, technology, engineering and mathematics) facility.

These developments did not go down well in Pittsburgh or in Bluefield, West Virginia, areas dotted with abandoned mines. Thus, a running battle ensued, pitting Wyoming against most other coal producing states for AML funding.

A 2006 re-authorization of the legislation carried a deal cut by Senator Mike Enzi: Wyoming would get back almost its entire AML share – with no strings attached – in $82.7 million annual increments to total around $580 million. (For more about how Senator Enzi achieved this, read this WyoFile feature.)

Here’s the problem though. Surpluses, especially trust fund surpluses, don’t last long in Washington. Congress is in hock to the Social Security Trust Fund to the tune of $2.7 trillion. Congress borrowed the money and spent it. The government has also borrowed from Medicare’s Hospital Insurance Trust Fund, which covers part “A” of Medicare.

There’s a fiduciary responsibility to pay both trusts back, but like the Zen master said, “we’ll see.”

Direct pilferage of the AML trust fund is just the next step, according to Beltway logic. The AML trust is seen as low-hanging fruit to pay federal bills. It used to be that those guarding Wyoming’s share of the AML till merely had to be on the lookout for raids staged by other coal-producing states. Now, the enemies are everywhere. George W. Bush advocated and the Obama administration continues to advocate cutting payments to Wyoming from the AML funds.

We’re even getting ambushed by our native sons and neighbors. Well, maybe.

Sen. Alan K. Simpson

Former Senator Alan K. Simpson (R – WY)

In 2010, former U.S. Senator Alan Simpson, our very own Cody cowboy advocated, as co-author of the Simpson-Bowles Budget Reduction plan, cutting Wyoming’s AML share.

The latest raid on the fund, according to Lummis, came from Wyoming’s neighbor to the north, Senator Max Baucus (D- Montana).

According to a press release from Lummis’ office, the AML fund was raided during negotiations on the federal highway bill that passed June 29th.

Short on revenue, the highway bill tapped into the AML fund by capping all AML payments to certified states at $15 million per year. Over time, that would deny Wyoming roughly $700 million that originated in taxes on coal mined in Wyoming.

Staffers at Baucus’s office call the charge “absolutely false,” although Baucus, chairman of the Senate Transportation and Infrastructure subcommittee, voted for the measure.

Think just Wyoming is vexed? Try talking to the folks in Pennsylvania. Their AML program lost $187 million over time as a result of the highway bill and the state has an estimated $15 billion backlog of abandoned coal mines yet to reclaim. “We have the most reclamation projects of any state,” said Andy McAllister of the Western Pennsylvania Coalition for Abandoned Mine Reclamation.

These raids on the AML trust represent a particularly potent irony for Wyoming. Since its territorial times, Wyoming has seen the federal government as a cash cow to milk at every opportunity. Now the tables are turned. Washington sees Wyoming with its mineral wealth as a source of revenue and we, quite naturally, don’t like that one bit.

What infuriates Wyoming is that if we don’t get our share back it means, in essence, that a coal company in Campbell County is paying the cost for turning a creek in southwest Pennsylvania from orange to something resembling clear. Economists call this rent-seeking: taxing someone, preferably an out-of-state entity, for the cost of local and state-wide services. Never mind that a number of the coal companies operating in Campbell County  have in fact operated in places like Pennsylvania too.

Wyoming is an expert on rent-seeking. For decades we’ve gotten mineral companies to pay for services that, in most states, fall upon the backs of citizen taxpayers. Since corporations tend to pass costs on to customers, who do you think pays for the billions Wyoming collects in mineral severance taxes? Downstream energy users in Missouri and Iowa, that’s who.

When it comes to recent federal highway funding, Wyoming has no qualms about spending someone else’s money. Recently, Wyoming has gotten $1.67 for every $1.00 it contributes to the Highway Trust Fund. For example, in FY 2010, Wyoming paid $159,117,000 into the Highway Trust Fund, while receiving $265,847,836.

The most recent highway funding, the one rejected by our delegation largely due to the AML raid it involved, will bring $750 million to Wyoming in the next three years. Of that, roughly $450 million will be ponied up by taxpayers outside Wyoming.

When it comes down to AML money, Wyoming citizens have no legitimate claim to its possession. It was never theirs in the first place. Coal companies passed on the cost of the per-ton tax to ratepayers outside of Wyoming.

Besides, nothing passed by Congress is ironclad.

Take the example of federal mineral royalties. In 2007, Congress changed – with very little debate – the formula for distributing federal mineral royalties. Instead of 50 percent of the royalties being returned to the state of origin, the share dropped to 48 percent. Wyoming, the lead recipient of federal mineral royalties sharing, has lost the most money — an estimated $18 million loss for 2008 alone.

Wyoming’s delegation in Washington is trying, of course, to restore the AML funding taken away by Baucus, et al. Tough job, that.  They’re playing financial whack-a-mole.

Former Congressman Teno Roncalio

Former Congressman Teno Roncalio (D-WY)

The climate of partisan polarization isn’t helping much. It’s worth remembering that in 1976 it took a bi-partisan effort for Wyoming Republican Senator Cliff Hansen and Wyoming Democrat Congressman Teno Roncalio to get the federal mineral royalty rate for states raised from 37.5 percent to 50 percent.

These raids on AML also hit another key spot in Wyoming central nervous system. They unmask how what a shaky job Wyoming has done in diversifying its tax base. Yes, Wyoming has done a better job recently attracting companies unrelated to coal, oil, gas, but without mineral money, our revenue stream goes into freefall. Thus, we have to protect that money at all costs. How long are we going to spend defending and manipulating a source of revenue as opposed to discovering new ones?

Samuel Western is a freelance writer living in Sheridan.

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Published on September 25, 2012

  • Dewey V

    Isn’t it just peachy living here in Wyoming, a Second World mineral and energy colony , ruled defacto by multinational corporations and a compliant Statehouse beholden to them ?

    Oh, to sit Enzi, Barrasso, and Lummis along with Guv Matt and Philo in a small unventilated room on hardwood pews under bright hot lights, and not let them up till they have read Samuel Western’s essay here and passed the quiz on it…

  • Greg Haas

    Mr Western,

    A few years ago when you talked about one of your books in Buffalo, WY I listened. Just after your talk, I went to the senior center here and asked the visiting Mr Enzi about the idea that Wyoming isn’t quite as “independent” as the board of tourism portrays. His response was a misdirection, of course: I must not have been talking to the same Wyomingites he’d been talking to.

    I’m commenting here because I’m appreciating the same ideas in the above article. We hear a lot of complaints and see a lot of bumper stickers about paying taxes but don’t hear much about all the others funding the services we enjoy so much. (At times, I feel a bit like I’m part of a population of spoiled little brats. If I didn’t see so many of these spoiled brats working so hard to make their livings I don’t know what I’d think of ‘em.)

    So thank you, and WyoFile, for this article. We need more reminders about just how dependent we are on our neighbors (and how dependent they are on us). It builds character!

  • Bob LeResche

    Thanks for a flawless summary of this silliest of issues. It doesn’t miss a point. If I read once more that “They’re stealing OUR money,” I’ll hurl.
    Sam’s sentence, “When it comes down to AML money, Wyoming citizens have no legitimate claim to its possession,” is the key. How have our congressional delegation missed this basic truism? Oh, that’s right…………… Being part of a nation with a Democratic president involves only rights, not obligations!

  • Brodie Farquhar

    Thank you, Sam, for a clear-eyed discussion about AML and what it really represents in our economy. And thanks for pointing out the hypocricy of our congress critters voting for the Ryan budget plan, then whining about how that mean ol’ senator from Montana is to blame.
    I suspect Wyoming is waaaay to comfortable and complacent with the status quo — thus the panic when AML funds are threatened.
    Poor congress critters, caught between Tea Party budget extremists, powerful and wealthy mineral/energy companies and a state budget that is woefully dependent upon mineral revenues.

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