A legislative committee formed in response to energy industry bankruptcies has identified weakness in state worker-protection and tax laws and is drafting corrective bills in response.
The Select Committee on Coal/Mineral Bankruptcies ordered a number of bill drafts to reduce the type of worker and government vulnerabilities exposed by several recent large coal company bankruptcies. The Legislature formed the committee in September as millions of dollars in losses mounted for miners, local businesses and state and local governments in federal bankruptcy courts.
Even as the committee moved bills at the Dec. 9 meeting, however, some lawmakers expressed unease with what they said could be too much regulation. The bills will face the full Legislature in February, where the amount of political support for further regulating the state’s bedrock industries remains to be seen.
“I’m very concerned that we’re overreacting,” said Senate President Drew Perkins (R-Casper). “I guess you could say anything worth reacting to is worth overreacting to, but I do think you have to be careful.”
The Legislature has to weigh protecting the state’s and workers’ rights against commerce and existing jobs, he said: “We can do things that make sure that by God you pay your taxes… or else. But at the end of the day do we strand assets, do we cost people their jobs?”
The committee was doing its job well, House Minority Floor Leader Cathy Connolly said (D-Laramie), passing “at least half a dozen bills that will positively address what’s happening with coal bankruptcies in terms of not only helping the counties but the workers.”
A representative for the petroleum industry said the “devil will be in the details” in how bills evolve over the course of a Legislative session that begins in February. But the industry isn’t opposed to the committee’s work, Petroleum Association of Wyoming Executive Director Pete Obermueller said.
“I don’t begrudge the position they’re in and the state is in,” he said in an interview with WyoFile. “I don’t have any heartburn over the way they’ve done it.”
A lobbyist for coal and other mining companies agreed, but said he wished the committee would focus more on penalizing bad actors than on changing the regulatory and tax structure of the state’s mining industry.
“This whole thing has come about because of a handful of operators that didn’t pay their taxes,” said Travis Deti with the Wyoming Mining Association. The proposed changes are “punishing good operators and there’s nothing so far that’s been discussed that’s punishing the bad actors,” he said.
Lawmakers ordered a raft of draft bills focused on two primary areas: protecting workers from predatory company behavior and helping state and local governments secure owed taxes.
Though more than 500 miners were shorted wages during the Blackjewel bankruptcy this summer, the Department of Workforce Services’ Labor Standards Division was only able to investigate 32 filed claims. Handcuffed by statute, the office was unable to act on behalf of the hundreds of other workers.
Investigators concluded Blackjewel owed $160,801 to the 32 workers who filed claims. Only $55,633 has since been paid according to a report the Department of Workforce Services provided lawmakers. “Blackjewel attorneys assert that additional payments have been made but no official supporting documentation has been provided,” the Department wrote in the report.
Anecdotal evidence from Campbell County suggests many workers did not file claims because they feared retaliation, Labor Standards deputy administrator Kelly Rosebery told lawmakers. As miners waited to see if they’d get called back to work, many feared those who acted against the company wouldn’t get the call, she said. Under the legislative suggestions advanced last week, such retaliation would be illegal, and Labor Standards would be able to perform a “class investigation,” on behalf of all affected employees.
Companies who don’t pay workers could be compelled to pay and face attorneys’ fees as well.
The state paid more than $1 million in unemployment insurance benefits to workers waiting to go back to work, and close to $30,000 more under various programs to help the workers.
Top energy industry lobbyists do not oppose stronger protections for workers, they said. “I wouldn’t be opposed to having the state have a little teeth to go after a company that didn’t pay their employees,” Deti said.
Getting workers their wages isn’t the only area in which the state finds itself statutorily weak. Unpaid taxes as a result of bankruptcies have skyrocketed in recent years — particularly when it comes to mineral ad valorem taxes collected by counties.
Statistics collected by the Wyoming Department of Revenue show the increasing scale of the problem, which corresponds with increasing turbulence for fossil fuel companies. Since 2010, $17.2 million in severance taxes have gone unpaid. The vast majority, $12.7 million, came from companies going delinquent on taxes just since 2017.
Ad valorem tax records tell a similar story — $97.7 million in unpaid taxes from 2009 to 2018. Once again, the vast majority, $85.8 million, accumulated between 2015 and 2018.
The sudden loss of outstanding taxes caused one expert to say there had been a sea change and the state could no longer count on energy companies to pay. “It’s fundamentally changed now,” Larry Wolfe, a former longtime lobbyist and attorney for the energy industry said. Each company that successfully uses bankruptcy to avoid taxes encourages other companies to follow suit, Wolfe said.
“You are the guardians of the tax system,” Wolfe told lawmakers. “If you don’t care… nobody does.”
Deti, the mining lobbyist, pushed back on that suggestion. “You have hundreds of operators in this state that pay their taxes on time that do operate in good faith,” he said. By not changing the system, “you’re not encouraging anybody,” not to pay. “The law says you gotta pay your taxes and good operators pay their taxes.”
Obermueller, the petroleum lobbyist, said state data show delinquent tax-payers remain a small minority in extractive industries like his. “Oil and gas is providing an enormous amount of revenue to the state and schools and we intend to do so for a long time,” he told lawmakers.
The committee is drafting laws to strengthen counties’ positions in federal bankruptcy courts and make ad valorem mineral tax payments due monthly, as opposed to 18 months after production as they are today. The latter solution would lower the risk bankruptcies carry for counties, as big coal companies like Blackjewel and Cloud Peak Energy have entered bankruptcy court owing tens of millions in back taxes.
It could also boost short term revenue collections, helping the state to plug its education funding deficit for a few years. During the transition to monthly ad valorem collections the state would collect both new taxes and the taxes energy companies had accrued over the previous 18 months, leading to a temporary influx of increased revenue.
Oil and gas companies ultimately have no argument with paying the taxes monthly, Obermueller said, but the transition would hit their cash flow as they pay both accrued and new taxes. To ease compliance pains for industry, Obermueller has asked lawmakers to consider forgiving some of a company’s state severance tax payments.
It’s unclear what impact making the transition with no tax incentive would be, Obermueller said, since some companies have set aside money for ad valorem taxes and some, perhaps, haven’t.
“I cannot speak as one monolith as to what a crisis it would be for any one company,” he said. “What I can say is that in tight energy markets cash flow is very, very important and it really shouldn’t be minimized.”
The discussion comes amidst a wave of upheaval for oil and gas in Wyoming, he said, with permitting processes, wildlife migration corridors and other changes all under discussion. At the same time, markets are killing the gas industry, which he told lawmakers is “merely” trying to survive.
Decisions on the ad valorem taxes won’t impact interactions between government and the Petroleum Association of Wyoming in other areas, Obermueller said in an interview. “I’m not playing games of ‘quid pro quo’ and neither is the industry,” he said. “We will engage in each one of these issues on their own merits.”
But, taken together the changes create uncertainty for investors and companies: “We talk about them as discreet issues but they don’t feel discreet to us,” Obermueller said.
Obermueller called some tax forgiveness a win-win. “It’s a massive increase in revenue for the state even with a [severance tax] credit,” he said. “For me it’s a ‘win, win, win’ situation. The state gets the policy it wants, it gets a sizable increase in revenue and industry is given an accommodation.”
The request for a tax incentive previously drew some heat from Democrat lawmakers. Last week, however, lawmakers on the committee appeared willing to negotiate with the industry on a tax break of some kind.
Landowner group the Powder River Basin Resource Council still opposes such a concession.
“The industry does not deserve or need another tax break,” PRBRC director Jill Morrison wrote to WyoFile. “These resources are finite and we get one opportunity to tax them.”
The oil and gas industry has already essentially stolen millions from the counties that is owed so why would we give them a severance tax break?” she wrote.
Another watchdog, Chris Merril with the Equality State Policy Center, said the oil and gas industry has always hunted for tax breaks from the Legislature for one reason or another. As recently as last year PAW backed a tax break industry said would incentivize more drilling.
The tax credit for an ad valorem transition is “the same request with different packaging that we hear every year,” Merrill said. “We collectively — the people — own those resources under the ground.” The payment schedule should be irrelevant, he said.
“They owe those taxes,” Merril said. “They knew that going into the bargain.”
Deti, with the Mining Association, noted the ad valorem change would hit companies outside the energy sector as well. He knew of three big trona mining companies planning expansions, he said, and argued having to pay off accumulated ad valorem taxes could impact those plans.
“This is not just about coal and it’s not just about oil and gas its about every operator in the state that brings something out of the ground,” Deti said.
Just because a company does not put money aside each month for its eventual ad valorem tax bill doesn’t mean it’s a bad operator trying to escape a tax debt, he said.
Another tax-enforcement measure faced even more scrutiny.
The committee advanced a bill that lets regulators stop the transfer of extraction rights from one company to another when taxes on the properties aren’t squared away. The proposed power to block sales between energy companies over tax issues raised worries from Perkins and some other lawmakers.
Perkins questioned if the bill would stop a property from moving to a better energy company.
“You’d rather have that field remain idle then have it a transfer to a more responsible producer that can maybe pay [the taxes] off over time?” he asked.
Blackjewel was still carrying unpaid tax debts from Contura Energy, which gave the doomed company the mines. Commissioners and county attorneys in Johnson County have been pursuing an $11 million tax debt that was passed among gas companies before one, Moriah Powder River LLC went into bankruptcy, according to reporting by the Buffalo Bulletin.