Wyoming News Exchange

Wyoming losing millions from mineral tax delinquencies
 
By Camille Erickson
Casper Star-Tribune
Via Wyoming News Exchange
 
CASPER — In just one decade, energy companies throughout Wyoming failed to pay $97.7 million in production taxes to counties on time, recent data compiled by Wyoming’s Legislative Service Office found.
Wyoming’s 23 counties charge coal, oil and gas companies for the minerals they extract. But delinquency has become somewhat of the new normal, particularly in Wyoming’s coal country.
In the last 10 years, the amount of ad valorem, or production, tax delinquencies increased over 1,700 percent in the state — rising from just over $2 million in 2009 to $39.2 million this year. Missed payments have forced local governments to contend with more and more unexpected budget shortfalls.
Part of the issue comes down to timing. Ad valorem taxes are due a full year and a half after a company extracts minerals.
Debate over the issue has cropped up in the Legislature multiple times over the years, yet little has changed. But state lawmakers on the Legislature’s new committee on coal bankruptcies started considering solutions Monday.
A draft bill on the table would require companies to pay production taxes every single month in similar form to severance taxes. (Energy companies have been delinquent on $17.2 million in severance tax payments since 2010).
According to testimony at Monday’s committee meeting, making the transition from collecting taxes every 18 months to every month could be tricky — for both operators and state officials alike. But with mounting budget deficits, few in the room disagreed that the tax system needed urgent attention. The question came down to how to amend a broken tax collection system without crippling the state’s vulnerable energy industry.
“You need to be hard-nosed about a tax system,” said Larry Wolfe, an energy and natural resources attorney in Wyoming. “If you don’t stand up for the integrity of the tax system, it will fall apart and that is exactly what we are seeing. The tax system is falling apart. ... This is about the companies stealing the money.”
There’s little doubt that increasingly fickle revenue streams have hit Wyoming local governments hardest. The uptick in delinquent taxes has forced some counties to pull money from reserves or look for a loan.
“I can tell you, it’s very, very difficult to budget with money that you don’t receive,” Rusty Bell, chairman of the Campbell County Commission told lawmakers Monday. “… It’s somewhat complex as far as figuring out those sorts of things. It’s even more complex when you don’t get that money.”
“(This year’s) numbers are not on here right now for ad valorem, and the trend is certainly going the wrong way,” Bell noted. “I realize that the vast majority of the taxes I would say 10 years ago, if we look back at those numbers most of those taxes were paid. But that trend is going the wrong way especially in the last three years. And at the first of the year when we get 2019 numbers in, they’re going to be earth-moving.”
Coal operator Blackjewel owed Campbell County millions of dollars in taxes this year when it filed for bankruptcy. (Over 59 percent of the total amount of delinquencies occurred in Campbell County in the past decade.)
The debacle generated significant attention from lawmakers and the public this summer. But Blackjewel was just one of 98 taxpayers throughout the state that fell behind on ad valorem tax payments.
Campbell County Commissioners approved a significantly reduced tax payment plan for the new owner of Blackjewel’s mines in October. Under the agreement, the county will require the new owner to pay just half of the $17.5 million in taxes owed by Blackjewel.
Less mineral money in Wyoming’s coffers could mean less money for education or other fundamental public services. According to a state economic report, 43 percent of the Wyoming School Foundation program’s revenue comes from mineral taxes and royalties.
But oil and gas operators came to the table with concerns too, noting the transition to a monthly payment schedule could be bumpy.
Bobby Rolston of Occidental Petroleum Corporation cautioned that asking operators to true-up, or adjust, tax payments on a monthly basis to meet the new ad valorem payment schedule could be costly.
“It would be a tremendous burden on an oil and gas company to do that,” he said.
Pete Obermueller, president of the Petroleum Association of Wyoming, urged lawmakers to not encumber the operators already dutifully paying their taxes.
“(The Petroleum Association of Wyoming) believes every single dollar of taxes accurately assessed and legally owed should be paid,” Obermueller emphasized. “There is no objection to that.”
But oil and gas companies had a delinquency rate of just 1.1 percent since 2010, according to Obermueller.
“That in my mind is a pretty small delinquency rate,” he said.
He recommended lawmakers provide ample lead-up time to the transition, allow companies to make payments over time and provide an incentive for industry to make the change. Oil and gas companies supplied $1.39 billion to the state through tax, lease and royalty payments.
One solution proposed by lawmakers and other state officials included placing the ad valorem money collected by the county in escrow. Counties would then release the funds to appropriate state entities once mill levies were set. But that would require a statutory change.
“I think that’s the absolute only way to make this work,” Converse County Treasurer Joe Schell said. “After you have a levy set, you keep everything even keel.”
Lawmakers did not emerge with a final decision on the draft bill Monday. Instead, Committee Chairman Eric Barlow elected to gather additional information in the interim. The committee will reconvene in January.