Lawmakers Advance Fossil Fuel Royalty Relief, CO2 Liability


Lawmakers have relegated a few energy bills to the cutting room floor so far this budget session as they continue to prioritize measures they hope will help extend coal power, launch carbon capture on a commercial scale and provide relief to fossil fuel producers facing an increase in the federal royalty. rates.

Fossil Fuel Royalty Relief

The Biden administration has signaled it will raise royalty rates for oil, natural gas and coal due to longstanding concerns that the rates are outdated and do not provide a fair rate of return for the right to produce and sell federal minerals.

The higher rates would generate more revenue for Wyoming because federal royalties are split 50-50 between the federal treasury and the originating state. But fossil fuel producers and some lawmakers worry the rate hike could disadvantage Wyoming for its disproportionate share of federal minerals compared to other producing states.

Two bills would provide financial relief to producers. They take slightly different approaches for coal and oil producers.

House Bill 105 – The coal tax cut would reduce the state’s coal tax rate from 7% to 6.5%, resulting in an estimated $10 million reduction in the annual revenue of state, according to the bill’s sponsor, Rep. Tim Hallinan (R-Gillette).

Rep. Tim Hallinan (R-Gillette) at the State Capitol, February 2022. (Mike Vanata/WyoFile)

“This will help coal companies reinvest in their infrastructure, purchase necessary equipment and supplies, implement recovery management and maintain a full workforce,” Hallinan told House Revenue on Tuesday. Committee. “It should be noted that operating costs have increased across the board under current inflation.”

A pause on state severance taxes could help both the coal industry and the communities that depend on it, Campbell County Commissioner Rusty Bell told the committee. “I think it would definitely benefit Wyoming and Campbell County, and all of us, if they put those dollars back into that infrastructure or things that maybe will increase coal usage,” Bell said.

However, a major coal producer – Arch Resources – confirmed this month that it was using the current windfall in Wyoming coal demand and prices to push through with its plan to shut down its two remaining mines in the United States. State. Opponents of a reduction in the coal layoff tax rate say it illustrates that market conditions, not taxes, drive coal production and mining jobs in Wyoming. This argument has defeated several past attempts to lighten the industry’s tax burden.

“The reason for that is really very simple,” Shannon Anderson, an attorney for the Powder River Basin Resource Council, told committee members. “The severance tax rate doesn’t dictate how much coal comes out of the ground.”

“This will help coal companies reinvest in their infrastructure, purchase necessary equipment and supplies, implement recovery management and maintain a full workforce.”

Representative Tim Hallinan (R-Gillette)

Rather, production and jobs depend primarily on coal prices and demand to fuel power generation, Anderson added. Although Wyoming’s coal production is on a decline that is expected to accelerate over the next decade, it’s even more important, she said, that Wyoming taxpayers get a fair rate of return as the industry always benefits from resources.

Revenue from the coal severance tax “goes to [state] general fund, it funds agencies across the state and it’s very valuable money to the state of Wyoming,” Anderson said.

The House Revenue Committee advanced HB 105 Tuesday 7-2, with Rep. Jim Roscoe (I-Wilson) and Rep. Mike Yin (D-Jackson) voting against.

Campbell County Commissioner Rusty Bell is pictured at the future location of the proposed Pronghorn Industrial Park in September 2021. (Dustin Bleizeffer/WyoFile)

Senate File 84 – Proportional tax relief for mining royalties takes a slightly different approach for oil and gas. Rather than reducing the state severance tax rate to help counter a planned increase in the federal mineral royalty rate, it would refund a portion of state severance tax payments to producers to offset increases in royalty rates.

The bill passed the Senate Minerals, Business, and Economic Development Committee on Monday by a 4-1 vote, with Sen. Chris Rothfuss (D-Laramie) voting against. The bill was to be debated in the Senate on Wednesday.

Carbon capture and coal power

One of three bills to encourage carbon capture, use and sequestration is still pending. Senate File 47 – Carbon Capture and Sequestration – Liability passed second reading in the Senate on Wednesday.

The measure, sponsored by the Joint Minerals, Business and Economic Development Committee, provides a method to transfer ownership and responsibility for CO2 stored underground from an operator to the state. An operator could apply for a transfer certificate after a monitoring period of 20 years to ensure geological stabilization.

Proponents say the measure is necessary to allay concerns of potential backers and help encourage a commercial market for CCUS that could help keep coal-fired power in line with policies that limit the industry’s contribution to climate change. .

Two other CCUS measures have fallen into disuse.

House Bill 61 – Carbon Dioxide in Public Works Feasibility Study would have required the University of Wyoming to analyze the cost-benefits of requiring CO2 captured by coal and natural gas power plants to be used in concrete for state-funded public works projects. The bill, sponsored by Rep. Clark Stith (R-Rock Springs) was not considered for introduction.

Senate Docket 64 – Carbon Capture and Sequestration has been withdrawn by the sponsor, Sen. Charlie Scott (R-Casper). This bill would have required utilities to retrofit coal-fired power plants with CCUS or sell the facility to a new owner who would install the technology. The original owner would then be required to purchase electricity from the upgraded power plant.

Coal Power Litigation

Meanwhile, House Bill 141 – Litigation Funding Changes for Coal Plant Shutdowns would expand the scope of a $1.2 million fund set aside in 2021 for the Governor sues states that impede the development and commercialization of Wyoming coal. In addition to suing the states, the governor could direct the attorney general’s office to take action against the federal government.

Last year’s bill was narrowly targeted, Gov. Mark Gordon’s chief energy adviser, Randall Luthi, told the House Economic Development, Business and Minerals Committee on Wednesday. Proponents had hoped that Wyoming would take legal action against Colorado and/or the electric cooperative Tri-State Generation and Transmission Association for abandoning coal-fired power generation.

Tri-State’s coal-fired electricity providers include the Laramie River Station power plant outside of Wheatland. But the Colorado Public Service Commission denied Wyoming’s request to intervene, Luthi said.

“So the question remains, how do we make this more viable?” Luthi said. “A [way] is to let us sue the federal government. And then there are sometimes third parties who also generate certain disputes in which, if we could intervene, it could be very useful.

Opponents say the Wyoming attorney general already has the power to initiate such lawsuits and that the $1.2 million appropriations could be better spent. The committee advanced the bill on Wednesday morning.


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