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State should hold the line on oil and gas taxes, regulations

An Aethon pump jack in the Moneta Divide oil and gas field east of Shoshoni. (Angus M. Thuermer Jr./WyoFile)

Along with millions of others around the world, Wyoming families are struggling to stay safe and afloat during the virus pandemic. Our state faces several severe budget crises that are only being made worse by the pandemic. But we should not be fooled into taking measures called for by the oil and gas industry, as they will only make our budget problems even worse.

Wyomingites have long supported the oil and gas industry; it provides jobs and critical revenue streams for our state, counties, and local communities. But now, industry executives and lobbyist groups are using the pandemic as an excuse to dodge their financial obligations to the state.

During the recent legislative session, Wyoming approved a 2% severance tax break for new oil and gas wells when the price is below $50/barrel for oil and $2.95/1,000 cubic feet for gas. Study after study has shown that tax rates do not determine whether a well gets drilled. The most important factors are geology and market forces. Low prices were already a problem before the pandemic because of a global glut in oil and gas production, so obviously the state won’t see a surge in new production anytime soon regardless of tax rates. To the contrary, we’ll likely have an uptick in shut-in and orphaned wells as financially stressed companies walk away from operations.

Even more troubling, companies are declaring bankruptcy and handing out multi-million dollar bonuses to their executives. Whiting Petroleum Corporation filed for bankruptcy last week and granted their executives $14.6 million in bonuses. Based on the facts, this is not an industry we can trust to look out for the public good without careful oversight.

But now the pandemic is straining oil and gas markets even more, and the industry has a whole new wish list they are asking Wyoming to grant. In a special meeting on March 31, the Wyoming Oil and Gas Conservation Commission voted — with only hours of public notice and testimony only from industry — to temporarily eliminate the conservation tax for the first time in Wyoming history. The conservation tax rate has fluctuated over the years and was set at .0005, or five-tenths of a mill. You may be thinking, it’s such an insignificant amount, it’s not a big deal. But if that’s the case, then why even give the tax break in the first place? We are giving away the state’s money at a time when we need it the most, and the irony is that the companies have already admitted this tax break will not make a difference in terms of keeping drilling operations afloat.

This conservation tax is how the WOGCC funds its budget, and it pays for plugging thousands of orphan oil and gas wells when companies default, and their bonds fall short of covering those costs. Continuing to cater to the industry’s every whim will leave more orphan oil and gas wells unplugged and spell disaster both for landowners living with the legacy of orphan wells on their land and for taxpayers left holding the bag.

On top of looting money from current and future Wyomingites, the oil and gas industry now is using a public health pandemic as an excuse to relax regulations put in place to protect public health. They want less reporting, less compliance and less burden. Both here and nationwide, petroleum organizations have lobbied officials asking for relaxation of requirements. How ironic that at this time of a public health crisis, we are doing the opposite of protecting public health by allowing the industry to release hazardous waste into our air, land, rivers and streams.

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Companies are also asking for reduced idle-well bonding, forbearance on local and state tax payments, and other measures they claim will help their bottom lines, even though it is clear oil and gas markets cannot be restored by these kinds of ill-conceived measures. Now more than ever, we need our state leaders to hold the line on regulations, taxes, and protections like orphan-well cleanup and idle-well bonding. We need to think of the future beyond the short-term pandemic and plan for our communities to thrive in the long term. 

Fossil fuel markets have been in general decline for some time. Now the COVID-19 crisis has underscored our need to diversify Wyoming’s economy. Our extreme dependence on the oil and gas industry has left us vulnerable. We need to focus on empowering and strengthening other sectors of our economy, and we need to recognize that forgoing important revenues during this time of great need is not the answer. We can no longer afford to put industry interests over the well-being of the people.


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Wayne Lax: Wayne Lax serves on the Board of Directors for the Powder River Basin Resource Council and lives in Cheyenne.