[[{“value”:”
With the state’s coal industry facing increasing federal regulations and a declining market, lawmakers are considering whether state subsidies, in the form of tax breaks, might mitigate the financial turmoil destabilizing a $650 million pillar of Wyoming’s economy.
The Legislature’s Minerals, Business and Economic Development Committee last week agreed to consider a pair of tax break ideas brought by the Wyoming Mining Association in hopes that reducing state revenue might pay dividends in maintaining coal production and thousands of jobs in the state that otherwise might disappear.
“These are tough times,” Wyoming Mining Association Executive Director Travis Deti told the committee. “Not only for the coal industry, but for the mining industry in general.”
Deti suggested lawmakers reduce the state’s severance tax rate for coal from 6.5% to 6% — a tax break that could save the industry tens of millions of dollars annually.
The coal association also suggested a tax credit strategy to benefit not only coal, but all mining operations, including trona and uranium. The idea is to discount mines’ state severance tax bills based on a percentage of local sales taxes paid when purchasing new mining equipment — an incentive to invest in continuing mining operations in the state, Deti said. He suggested crediting coal operators for 35% to 50% of sales taxes, and limiting the incentive to mining equipment used at existing mining operations in the state.
The moon rises over a coal silo at the Dry Fork Mine just north of Gillette. The Dry Fork Mine feeds the Dry Fork Power Station. (Andrew Graham/WyoFile)
“It just kind of gives the company a little incentive to keep investing in their Wyoming operations and gives them a little bit of tax relief when they have to make those investments,” Deti told committee members.
But the goal of maintaining or even boosting natural resource production by lowering state taxes and fees has long been in question in Wyoming.
The Mineral Tax Incentives, Mineral Production and the Wyoming Economy study, often referred to as the “Gerking report” for the study’s lead author, Shelby Gerking, concluded in 2000 that various state severance tax reductions do not have a significant impact on employment and production.
“We’ve seen study after study to this effect,” said Shannon Anderson, attorney for the Sheridan-based landowner advocacy group Powder River Basin Resource Council. “State tax policy does not drive whether or not minerals get produced. It’s geology and commodity prices. It’s the global economic picture. The whole basis of a severance tax is that this is a one-time opportunity to tax this finite mineral resource.”
Coal’s outlook
Wyoming has heavily relied on coal mining for the past 50 years, dedicating much of the revenue to funding K-12 schools and growing the state’s Permanent Mineral Trust Fund. So when there’s a decline in coal production, there’s a corresponding impact on the state’s budget.
And coal’s current outlook spells trouble for the state’s finances.
Wyoming coal production has decreased by nearly half since 2008. (University of Wyoming)
Wyoming coal exports to the U.S. utility market were down 20% during the first quarter of the year due to a mild winter, low natural gas prices and increasing competition from renewable sources of electric power generation. On-site stockpiles of coal at power plants remain flush, according to the U.S. Energy Information Administration, which means demand for Wyoming coal is likely to remain lower than usual in coming months.
Adding to the industry’s troubles, the U.S. Environmental Protection Agency recently issued four new rules to drastically reduce coal pollution, including a 2032 deadline for coal-burning power plants to cut planet-warming carbon dioxide emissions by 90%, or convert to natural gas or close altogether. That means Wyoming coal’s market — which almost entirely consists of U.S. power plants — is likely to shrink even further.
Though Wyoming has already joined several other coal-reliant states in a pair of lawsuits to block the new federal rules, utilities are under pressure to convert or close coal plants under the assumption that the rules might stand, according to one coal industry attorney.
A coal train snakes through the hills north of Gillette. (Dustin Bleizeffer/WyoFile)
“Things are difficult,” Deti said. “Market conditions are tough.”
Lingering doubts
Industry officials representing Wyoming coal, oil and natural gas frequently propose tax breaks and other state-level financial incentives, insisting that decreasing direct revenue is outweighed by maintaining jobs while keeping the core of Wyoming’s mineral-derived economic revenue in place.
In fact, that argument prevailed in 2022, when the Legislature lowered the state severance tax rate for coal from 7% to 6.5% — about a $10 million annual savings for coal operators in the state. Whether the tax break has effectively maintained coal mining jobs and kept some mines in operation that might have otherwise closed is an open question.
Before the severance tax break was enacted, Arch Resources — the state’s second-largest coal producer — had already announced its intention to eventually close its two Wyoming mines without setting a timeline. Although the Black Thunder and Coal Creek mines are still in operation, Arch said it plans to eventually close them. The company recently hinted at layoffs due to a continually declining market for Wyoming coal.
“State tax policy does not drive whether or not minerals get produced. It’s geology and commodity prices. It’s the global economic picture. The whole basis of a severance tax is that this is a one-time opportunity to tax this finite mineral resource.”
SHANNON ANDERSON, POWDER RIVER BASIN RESOURCE COUNCIL
During the committee’s discussion last week, Rep. Cyrus Western (R-Sheridan) questioned the merit of another severance tax break and asked Deti what coal companies are doing with the savings.
“Trying to stay alive,” Deti responded. “This body, and the industry, we’ve got to strike the right balance to where we are in the market and in the current state of affairs.”
The committee withheld action on the proposals, noting that the Revenue Committee might take up the issue when it meets later this month in Casper.
Anderson, of the Powder River Basin Resource Council, told WyoFile there will likely be significant opposition to a tax break for the industry.
“We have an obligation, not only to this generation, but future generations, and to make sure that we get adequate revenue for that resource because, once [coal] is mined, it’s gone forever.”
Take the Survey at https://survey.energynewsbeat.com/
ENB Top News
ENB
Energy Dashboard
ENB Podcast
ENB Substack
The post Wyoming coal producers plead for state tax breaks amid new federal rules, crushing market forces appeared first on Energy News Beat.
“}]]