I usually have a lot of self control when I hear ridiculous things at legislative committee meetings.

For example, when I attended a recent Joint Minerals Committee session and listened to Sen. Bo Biteman (R-Sheridan) propose giving the coal industry a severance tax break at a time when Wyoming is scrambling for all the revenue it can muster, I winced but kept scribbling notes. The remark merited headshaking, or perhaps even a guffaw, but such reactions are bad form for journalists.

It eased my annoyance when the senator’s colleagues quickly shot down his idea, noting that all it would do is put state government deeper in the red. 

But I’m glad I didn’t attend the first meeting of the new Select Committee on Coal/Mineral Bankruptcies on Oct. 14. Just reading the news accounts of audacious suggestions made by the fossil fuel industry, I can picture my head spinning like a top until it popped off. 

As my bespectacled bald head rolled on the committee room floor, bouncing like a soccer ball between cowboy boots and shiny shoes, I would have tried to impart these final words: “You’ve got to be kidding me.”

Legislators discussed a tax-collection proposal they have already shot down several times, despite the fact that it makes good sense and would benefit Wyoming counties and schools.

Right now, energy companies pay counties ad valorem mineral taxes an average of 18 months after the coal, oil or gas are produced. All other mineral severance taxes, on the other hand, are paid to the state monthly.

In light of bankruptcies that have cost counties millions of dollars in lost taxes, the committee has resurrected the idea of changing ad valorem collections to monthly, too. If enacted, companies would be required to keep current on their taxes, preventing future losses for counties.

Pete Obermueller, executive director of the Petroleum Association of Wyoming, bemoaned what he described as the unfairness of industry having to fork over the taxes accumulated over the last year and a half, plus what they would begin paying monthly under the change.

His solution? Lawmakers simply write off hundreds of millions in ad valorem mineral taxes owed on years past, while the companies generously agree to switch to monthly payments!

I think the average Wyomingite can comprehend how badly counties would get hosed if the state allowed such an exception. But to understand precisely how outrageous that idea is requires further explanation.

Here’s an all-too-real-life example of what happened under the current system. Cloud Peak Energy left Campbell County holding an empty bag that was supposed to be filled with $8.3 million. The company owed that money for coal produced during the last half of 2017. Cloud Peak filed for Chapter 11 bankruptcy protection May 10, 2019 — the day the tax was due.

That’s only a fraction of the county’s potential losses. It may not see any money at all for coal mined by Cloud Peak in 2018, which would amount to about $17 million in taxes.

And when legislators considered a draft bill that would have switched to monthly ad valorem payments in 2014, who do you think cried foul the loudest? Why, none other than Cloud Peak.

Sen. Michael Von Flatern (R-Gillette) told Greg Johnson of the Gillette News Record that legislators met with Cloud Peak officials five years ago regarding the proposal.

“‘Why are you punishing us?’ That’s the reasoning they gave, that you’ve never had problems with the coal mines and this law will hurt the coal mines the most,” Von Flatern recalled. 

At the select committee’s recent meeting, Wyoming Mining Association Director Travis Deti said the entire energy industry shouldn’t have to shoulder the burden for what “bad actors” have done.

But even Deti later admitted that Cloud Peak’s behavior “makes it tougher to defend our position today.”

Obermueller claimed the state’s change to monthly payments while also collecting back taxes “would be punitive, but they’re not punitive to the companies that [county commissioners] are angry about.”

Campbell County commissioners are right to be upset. Cloud Peak played the victim, then declared bankruptcy to get out of paying its tax bill.

According to an August 2018 report by the Powder River Basin Resource Council, 13 counties carried nearly $55 million in delinquent production taxes.

The deficiency of those funds greatly hurts education. Three-fourths of ad valorem mineral tax collections go into the general education pool to fund school districts statewide. 

Campbell County School District No. 1 Superintendent Alex Ayers told legislators his district will ask the state for a short-term loan of between $10-15 million in order to pay its bills.

But here’s another loophole: minerals companies can take millions of dollars in taxes they owe and invest that money in stocks or bonds, plow it back into operations or debt reduction or use it for other ventures up to the point where it’s finally due long down the road. It’s not as though those tax dollars are safely secured and recoverable in an escrow account like the semi-annual property taxes you have to pay.

A fiscal note on the monthly collection draft bill states that schools would earn a short-term revenue boost of $284 million from 2019 mineral production on top of the 2018 tax revenue. Some lawmakers think that’s unfair and suggested they could reduce that “windfall” by lowering payments to public education from state severance taxes.

Dear reader, if you listen closely, you should be able to hear me scream, no matter what far-flung corner of Wyoming you call home. All educators throughout Wyoming should join me.

Why on earth would a state that is estimated to be $250 million short in its education funding give back money that is fairly and legally owed to its public schools? Are you kidding?

Legislators aren’t kidding. It seems obvious that to get the monthly ad valorem pay schedule bill approved, there will be some type of scheme to give minerals companies a break.

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Obermueller told the committee that suddenly having to pay accrued taxes and taxes on current production could hurt the industry and may even “accelerate” bankruptcies. If that happens, his argument goes, blame the state.

Coal, oil and gas operators that have folded in Campbell County alone have cost the county more than $100 million in ad valorem taxes, according to Von Flatern.

I think Von Flatern was spot-on when he told the News Record that companies should have to bite the bullet and pay up.

“They’ll argue that it will put them under. I’m not so sure about that,” he said. “In the end, if you give away the candy store, eventually you find yourself very poor and very hungry.”

The PRBRC report further elucidated the consequences of letting companies off the hook: “The deficits faced by counties are significant and, given current laws, are certain to grow. If left unchecked, these debts are likely to mount to crisis level,” it read.

Those words were written before Cloud Peak and Blackjewel went bankrupt. The crisis is here. Instead of granting blanket forgiveness to unpaid minerals taxes, legislators should focus on one thing: collecting every dime that’s owed to counties and schools.

 

Kerry Drake

Veteran Wyoming journalist Kerry Drake has covered Wyoming for more than four decades, previously as a reporter and editor for the Wyoming Tribune-Eagle and Casper Star-Tribune. He lives in Cheyenne and...

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    1. Regarding “Absolute power corrupts absolute, per Voltaire.”

      This is one of the best quotes ever, but it comes from English Catholic historian John Emerich Edward Dahlberg-Acton known for short as Lord Acton.

      The quote is found in a letter he wrote in 1887 to scholar and ecclesiastic Mandell Creighton wherein Acton opposes efforts to promulgate the doctrine of papal infallibility in the First Vatican Council. Here is a part of Acton’s letter with the quote and a bit more:

      “I cannot accept your canon that we are to judge Pope and King unlike other men, with a favorable presumption that they did no wrong. If there is any presumption it is the other way, against the holders of power, increasing as the power increases.

      Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority, still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it.”

  1. As always, thank you Mr Kerry for blasting through the bullfeathers and showing Wyoming resident’s that the Emperor isn’t wearing any clothes. How long will Wyoming voters put up with these underhanded tactics? Are we really that dumb?
    (Ok, don’t answer that last question…)

  2. Allow me to footnote this article.
    Back in the late 1990’s when Wyoming’s state funding was trending dow to one of those grim places, the Legislature turned their myopic gaze onto mineral taxation. Coal severance taxes were coming to the front burner. The Lej commissioned the UD Department of Economics under the leadership of Shelby Gerking PhD for a deep dive into the entire fiscal flow of minerals production and minerals taxation , specifically the effect one had upon the other. The Lej wanted to know once and for all how taxes affected mineral production and ad valorem revenues. They thought they would have a bulletproof finding that taxes hurt oil, gas, and coal.

    They were mistaken. Gerking’s team took a full year and produced a 305 page report that concluded taxation has a negligible effect on minerals and energy production regardless of the rate of assessed ad valorem taxes collected. Regarding coal, It didn’t matter if a coal company was paying 6 percent ad valorem at the minemouth or 12 percent … the volume of coal produced was statistically unaffected. The coal companies themselves weren’t even the entities paying the tax… it was a pass through cost to the railroad hauling the stuff or the powerplant burning it. Ten dollars worth of Wyoming coal including the 95 cents of severance tax became $ 40 FOB when delivered to the end user. Gerking’s team resolved that Taxes did not impede or stop a single ton of coal from being mined and sold of their own accord , not when factored in with all other economic variables driving the coal industry

    I presume The Legislature must’ve had a collective cow or at least a few cardiac episodes when that report’s findings came back to the gilded halls in Cheyenne on December 1 , 2000. What I do know is the report was promptly buried. The Lej disavowed it because their ideology and intuition that swore taxes were punitive was proven false , or at the least irrelevant – and our solons got right back on their Republicans Repulse Taxes warwagon as if the countermanding report never existed… the report they themselves had bought and paid for.

    You don’t have to take my word for it. The report is still online in its entirety , thus and so : http://eadiv.state.wy.us/mtim/StateReport.pdf

    I will close by saying ” Mineral Tax Incentives, Mineral production, and the Wyoming Economy ” by Gerking, Morgan, Kunce, and Kerkvliet is maybe more relevant today than it was 19 years ago. I sincerely hope that the likes of Sen. Bo Biteman , Mining Minister Travis Deti , and our Prime Minister of Oil Peter Obermueller will take it to heart along with all other stakeholders and legislators involved.

    The Bottom Line is this is precisely the time for Wyoming to RAISE – not lower – severance taxes on minerals , and any talk of tax abatement or forgiving back due taxes owed the State and counties is egregious.

  3. The minerals industry never misses a chance to make a case against paying the taxes it owes. These pitches are outrageous.