Wyoming Legislature update – July 25, 2016
by Albert Sommers, House District #20 Representative
August 1, 2016
Hello Sublette County, on June 28-29 in Gillette I participated in a meeting of the Joint Minerals, Business, and Economic Development Committee. During this meeting we heard updates on such issues as self-bonding for mining reclamation, new EPA rules for underground fuel storage tanks, priority of severance taxes in bankruptcy proceedings, the new engineering building at the University of Wyoming, and some new value added enterprises in Wyoming’s minerals industry.
There has been a lot of discussion in the media about the amount of unsecured reclamation bonding in the coal mines of Wyoming, and concern has been heightened by bankruptcy filings of three of Wyoming’s largest coal operators. Bonding is financial assets set aside to ensure that companies complete the reclamation required by their permits to mine. Who is on the hook for what some say is a $2 billion dollar self-bonding reclamation IOU? Self-bonding has been a method approved by the federal government. When companies lose sufficient capital, state regulators step in to replace self-bonding with secured bonding.
We heard a presentation from the Wyoming Department of Environmental Quality (WDEQ) on this issue. They are pursuing an investigation of self-bonding to see if changes are needed in the program. Our surrounding states all handle this issue differently. Colorado self-bonds, but has tightened up the practice. Montana does not allow self-bonding, and Utah does. Many states around the nation still allow self-bonding. The practice seems to work, as long as the test to ensure financial solvency of the company is performed often enough to capture changing market conditions. Wyoming was able to move one bankrupt coal company from self-bonding to secured bonding in time to reduce some risk, but it appears to me that our trigger to move from self-bonding to secured bonding needs to be revisited. The debate in the media centers on how much secured bonding should replace self-bonding in this time of crisis for these bankrupt coal companies. As the WDEQ investigation progresses, our committee will continue to review the situation in order to determine if we need to change current statutes.
In Sublette County, we are acutely aware of the sharp economic downturn in the minerals industry. Boom and bust has a long history in Wyoming, and this downturn has caused multiple bankruptcies in the minerals industry, including natural gas companies. One of our agenda items was to examine the priority of severance taxes in bankruptcy. Severance taxes are due 60 days after production, which means that Wyoming’s revenue from severance tax is at risk for those 60 days in the event of a mineral company bankruptcy. The lien priority for severance and ad valorem taxes on produced minerals is different from the lien priority on your house if you go bankrupt. If a homeowner goes bankrupt the property tax lien has top priority, even over the banks. That is not the case with mineral production; the severance and ad valorem tax lien priority on minerals is below those of banks. This puts lending institutions’ interests ahead of the citizens of Wyoming, a practice I disagree with. The ad valorem tax on produced minerals is collected roughly two years after production, which puts a lot of state and county taxes at risk during a bust. At the state level, ad valorem taxes pay for most of K12 School funding, and our counties are operated on those monies. The committee chose not to take up lien priorities when my motion to draft a bill to fix this issue was defeated in committee in a 5-5 tie vote. The Bankers’ Association and the Petroleum Association of Wyoming spoke against the motion, because they were afraid it would restrict lending to mineral companies. I do not believe this would occur, because the lien priority on property taxes does not seem to restrict lending for the purchase of homes. We certainly do not want to inhibit companies’ abilities to receive loans, but these mineral resources belong in part to the people of Wyoming, and it is my job to protect those interests.
We also heard an update from the UW’s Dean of the College of Engineering, Dr. Michael Pishko, on the construction of the new engineering building and the "Tier 1" engineering initiative. This project will cost nearly $100 million dollars, and hopefully will not be plagued by cost overruns. I urged Dean Pishko to maintain and enhance engineering programs that will support future economic development in Wyoming, especially in high-tech sectors.
Our committee also heard a report from Wyoming State Banking Commissioner Albert Forkner, who presented a bill to provide needed updates to Wyoming banking statutes.
We heard two interesting presentations on value added energy products being developed in Wyoming. It is important for Wyoming to develop value added industries if we hope to diversify our economy. We heard from Atlas Carbon, which takes Powder River Basin coal and makes activated carbon, used in a myriad of applications including water purification. Atlas Carbon has developed a new process which could make it very competitive in the marketplace. We also heard from Carbon Creek Energy and Mercator Energy, who are together trying to exploit an environmentally friendly energy niche in California. Apparently in California consumers are willing to pay more to be able to burn natural gas from non-fracked wells. These two companies own coal bed methane wells in Campbell County. This gas is produced without the use of fracking technologies. In agriculture, we have learned that consumers are willing to pay more for food that is produced using "green" practices, and that same trend is moving toward the energy industry.
Wyoming has world class traditional and renewable energy opportunities, and we have one of the greatest landscapes on earth. Our challenge in Wyoming is to enhance these energy opportunities and create new economic development strategies while preserving the Wyoming we all love.