Fee relief measure clears Senate’s first hurdle | Wyoming
CASPER — The federal government is reportedly considering raising the royalty rate in the next sale of oil and gas leases. An attempt by state lawmakers to offset such an increase is one step closer to passing a law.
Wyoming receives 49% of royalties generated from oil and gas production on its federal lands. Senate Docket 84, sponsored by the federal Natural Resources Management Committee, would return the state’s share of federal royalties to oil and gas producers. It passed an introductory vote by a 26-4 margin on Tuesday, easily exceeding the two-thirds majority needed to pass in committee.
The bill sends a message to the federal government: Wyoming, the largest natural gas producer and second largest oil producer on federal lands, does not want royalties to increase. And that sends a message to producers that the state is on their side.
“Anything that helps reduce the cost of doing business on federal lands obviously makes those parcels more attractive to operators,” said Ryan McConnaughey, director of communications for the Petroleum Association of Wyoming.
The Biden administration’s temporary halt on new oil and gas leases has eroded operator confidence in the federal program. Since about half of Wyoming’s land is federally owned, proponents of Senate File 84 hope it will make the state’s federal lands more attractive.
Not everyone agrees that dismissing the prospect of additional federal royalties is the right approach.
“Wyoming would really shoot itself in the foot and then turn around and want to give money back to the industry,” said Jeremy Nichols, director of the climate and energy program at environmental group WildEarth Guardians.
According to Shannon Anderson, staff attorney for the Powder River Basin Resource Board, geology is the biggest factor driving mine development, followed by market price. Everything else, including taxes and fees, comes after.
These third-tier factors, however, are the only ones the state can control, although Wyoming still lacks the authority to refund federal royalties directly. Instead, Senate Docket 84 would ask the state treasurer to transfer a portion of the state’s federal royalties to the severance pay distribution account. The Wyoming Department of Revenue would then issue departure tax refunds calculated based on the increase in federal royalties.
If the royalty rate were to increase, opponents of the bill say, the state could use the money to cover its existing budget shortfalls.
“It’s bad policy for Wyoming to send that kind of message — that we don’t want the revenue opportunity that federal mineral royalties would bring to the state,” Anderson said.
But some in Wyoming, where tax rates are already high compared to neighboring states, believe the bill is a necessary sacrifice that can sustain oil and gas production over the long term.
According to McConnaughey, this demonstrates “the state’s willingness to ensure Wyoming’s competitiveness in the face of challenges coming from the Biden administration.”
The bill is now referred to the Senate Committee on Minerals, Business and Economic Development for review.
This story was published on February 16.