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Critics Warn: Cutting Oil/Gas Tax Won't Increase Production

Arek Socha/Pixabay
If House Bill 11 becomes law, oil and gas producers would be able to claim severance-tax exemptions when prices are low, and high.

Wyoming lawmakers are considering a bill that would cut severance taxes paid by oil and gas companies from 6% to 3%.

Proponents argue the move will attract new drilling to the state as the industry rebounds from last year's oil-price crash.

Sen. Cale Case, R-Lander, agreed the mineral industry is an important partner, but said as the owners of the minerals, now is not the time to give up more of the state's share of revenues.

According to the bill's fiscal note, the state stands to lose $13.5 million annually.

"Our change in taxes won't make any difference," Case contended. "This bill just leaves money on the table, and I really don't believe - and our studies that we've done show - that it won't change future behavior."

Case chairs the Senate Revenue Committee, and said House Bill 11 would make it even harder to address the state's $750 million budget deficit.

Gov. Mark Gordon believes the move will help the oil and gas industry as it faces restrictions under the Biden administration.

Industry groups claim the measure will help Wyoming compete for drilling projects against states with lower overall costs, including North Dakota, Oklahoma and Texas.

Case pointed to two studies, one prompted by Wyoming's House Minerals Committee, that came to the same conclusion: Cutting severance taxes simply reduces revenue and doesn't boost production or increase employment.

"The two biggest drivers in terms of why people produce in a particular region are the geology and the prices of what they can sell the product for," Case outlined.

Wyoming lawmakers reduced severance taxes during last year's downturn in oil prices with House Bill 243, where exemptions are triggered if the price of oil drops below $50 a barrel.

Case added he's especially troubled that House Bill 11 would cut the state's share of revenues when prices climb above $45 a barrel. If the proposal becomes law, producers would be able to claim exemptions when prices are low, and high.