I usually have a lot of self-control when I hear ridiculous things at legislative committee meetings.
But I’m glad I didn’t attend the first meeting of the new Select Committee on Coal/Mineral Bankruptcies on Oct. 14. Just reading the news accounts of audacious suggestions made by the fossil fuel industry, I can picture my head spinning like a top until it popped off.
As my bespectacled bald head rolled on the committee room floor, bouncing like a soccer ball between cowboy boots and shiny shoes, I would have tried to impart these final words: “You’ve got to be kidding me.”
Energy companies now pay counties ad valorem mineral taxes an average of 18 months after the coal, oil or gas are produced. All other mineral severance taxes are paid to the state monthly.
In light of bankruptcies that have cost counties millions of dollars in lost taxes, the committee has resurrected the idea of changing ad valorem collections to monthly, too. Companies would be required to keep current on their taxes, preventing future losses for counties.
Pete Obermueller, executive director of the Petroleum Association of Wyoming, bemoaned the unfairness of industry having to fork over the taxes accumulated over the last year and a half, plus what they would begin paying monthly under the change.
His solution? Lawmakers simply write off hundreds of millions in ad valorem mineral taxes owed on years past, while the companies generously agree to switch to monthly payments!
The average Wyomingite can comprehend how badly counties would get hosed if such an exception was allowed. But to understand precisely how outrageous that idea is requires further explanation.
Cloud Peak Energy left Campbell County holding an empty bag that was supposed to be filled with $8.3 million. The company owed that money for coal produced during the last half of 2017. Cloud Peak filed for Chapter 11 bankruptcy protection May 10, 2019 – the day the tax was due.
The county may not see any money at all for coal mined by Cloud Peak in 2018, which would amount to about $17 million in taxes.
When legislators considered a draft bill that would have switched to monthly ad valorem payments in 2014, who do you think cried foul the loudest? Why, none other than Cloud Peak.
Sen. Michael Von Flatern, R-Gillette, told the Gillette News Record that he met with Cloud Peak officials five years ago.
“‘Why are you punishing us?’ That’s the reasoning they gave, that you’ve never had problems with the coal mines, and this law will hurt the coal mines the most,” Von Flatern recalled.
Wyoming Mining Association Director Travis Deti said the entire energy industry shouldn’t have to shoulder the burden for what “bad actors” have done.
But even Deti later admitted that Cloud Peak’s behavior “makes it tougher to defend our position today.”
Obermueller claimed the state’s change “would be punitive, but they’re not punitive to the companies that (county commissioners) are angry about.”
Campbell County commissioners are right to be upset. Cloud Peak played the victim, then declared bankruptcy to get out of paying its tax bill.
According to an August 2018 Powder River Basin Resource Council report, 13 counties carried nearly $55 million in delinquent production taxes.
The deficiency of those funds greatly hurts education. Three-fourths of ad valorem mineral tax collections go into the general education pool to fund school districts statewide.
Schools would earn a short-term revenue boost of $284 million from 2019 mineral production on top of the 2018 tax revenue. Some lawmakers suggested they could reduce that “windfall” by lowering payments to public education from state severance taxes.
Why on Earth would a state that is estimated to be $250 million short in its education funding give back money that is fairly and legally owed to its public schools? Are you kidding?
Legislators aren’t kidding. It seems obvious that to get the monthly ad valorem pay schedule bill approved, there will be some type of scheme to give minerals companies a break.
Obermueller said that suddenly having to pay accrued taxes and taxes on current production could hurt the industry and may even “accelerate” bankruptcies. If that happens, his argument goes, blame the state.
Coal, oil and gas operators that have folded in Campbell County alone have cost the county more than $100 million in ad valorem taxes, according to Von Flatern.
Von Flatern was spot-on when he said companies should have to bite the bullet and pay up.
“They’ll argue that it will put them under. I’m not so sure about that,” he said. “In the end, if you give away the candy store, eventually you find yourself very poor and very hungry.”
The PRBRC report stated, “The deficits faced by counties are significant and, given current laws, are certain to grow. If left unchecked, these debts are likely to mount to crisis level.”
Those words were written before Cloud Peak and Blackjewel went bankrupt. The crisis is here. Instead of granting blanket forgiveness to unpaid minerals taxes, legislators should focus on collecting every dime that’s owed to counties and schools.