Wyoming Goes Bust

Wyoming’s fortunes were in sharp decline by the end of the ’80s, although the 1970s had been pretty good. The 1973 OPEC oil embargo had caused price hikes for all American fuels, not just oil and gas,xii and in minerals-rich Wyoming employment boomed.xiii Casper, long known as the “Oil Capital of the Rockies,” had refineries that processed millions of barrels of oil annually—a drop in the bucket on a world scale, but fairly substantial for Wyoming. Drilling rigs sprang up like sunflowers across the state. Wyoming strip mines produced the most coal in the country.

The strain on the state’s ability to house the new workers, educate their children, and even dispose of their sewage was soon apparent. A mineral production tax — a so-called “severance tax” — had been passed in 1969, and to meet the new demands of the 1970s it was increased as fuel mineral prices rose. In 1974, voters approved the Wyoming Mineral Trust Fund, bankrolled by a 1.5 percent severance tax on all minerals extracted in the state. The tax rate on coal rose from 3 percent in 1973 to 10.5 percent in 1979. Rates went up and down, but by 1985, the state of Wyoming imposed severance taxes ranging from 4 percent of gross value for crude oil and natural gas stripper wells, to 6 percent for non-stripper wells, to 10.5 percent for surface coal and 7.25 percent of gross value for underground coal.

Wyoming, without corporate or personal income taxes, became increasingly dependent on natural resources for money to fund government and social services. The percent of state revenues from severance taxes rose from 20.1 percent of total taxes in 1977 to 52.8 percent in 1983. When Wyoming’s half share of federal royalties was added, levies on the state’s natural resources made up 62.32 percent of the state’s income.

In early 1980s, the value of energy minerals began to drop as oil prices headed to a 1986 worldwide crash. The drop in state severance tax income was not immediate (Wyoming’s energy tax revenues grew at an annual rate of 61.2 percent from 1977 to ’83), but certainly was on the way: from 1982 to 1983, the state’s severance tax revenues experienced what bankers euphemize as “negative growth” of -0.1 percent.

Three levels of government—federal, state and local—assess charges on mineral production in Wyoming. Grossly over-simplifying, we can say the feds, through Minerals Management Service, collect leasing royalties and give Wyoming about half the take; the state, through the Department of Revenue, imposes severance taxes at varying rates, as well as Oil and Gas Conservation taxes; and Wyoming’s counties, through their Boards of Commissioners, levy ad valorem property taxesxiv on the value of the previous year’s production assessed by the state Department of Revenue. Each government entity may offer the industry various tax breaks, bonuses, “royalty relief,” and other features designed to let businesses legally pay less than the tax law would otherwise require. Each of the three tax systems gives a financial nod to the existence of the others; taxes levied by one entity may be deductible expenses for another.xv The taxing governments may also share information, and even some duties, such as auditing or site inspection. The three systems are not supposed to be antagonists, but as it turns out, they often are.

Laton McCartney

Laton McCartney was born in Denver, Colorado and grew up on cattle ranches in Colorado and Wyoming. He is the author of the national bestseller, Friends in High Places: The Bechtel Story—The Most Secret...

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  1. Comment from NewWest.net reader:
    By Dewey, 8-18-09

    This is maybe the best piece of circumnavigational investigative reporting I have read about my home state of Wyoming in a long, long time… I’m gonna lobby the Casper Star Trib to publish this verbatim ( wish me luck on that ).

    If you had any prior doubts that the state of Wyoming was anything other than a colonial brothel for the mineral industry…

  2. Great stuff! Thanks! (I guess that’s Earl Devaney in the photo with Salazar — had to look him up with Google just to make a guess. I miss the good old days, when photos had cutlines that told who was in a pic, when and where it was taken, etc.)

  3. An estimable job of research and reporting, exhaustively documented. I look forward to reading more about this subject, and I would like to be in contact with Pro Publica and the authors about how one might suggest other stories related to mineral resources and their management.