Change in mineral tax payments faces early challenges

CASPER — Legislation signed into law this year requires energy firms in Wyoming to fork over mineral tax payments to county governments on a more frequent, monthly basis. But the road to implementing the new tax rules could be bumpy for public officials and industry alike. 

Wyoming’s counties have long wrestled with energy companies over the timely collection of ad valorem taxes, or the taxes county governments charge mining and drilling companies for extracting natural resources. 

Between 2009 and 2019, mineral production tax delinquencies totaled over $100 million, according to data compiled by the Wyoming County Commissioners Association. The revenue generated through these mineral production taxes have proven critical to residents throughout the Equality State, providing billions of dollars to schools, roads and other essential public services. 

But not every company has paid up. 

For the better part of the past decade, the state’s Legislature has attempted to amend the tax rules and intervene in this pattern of late payments, but to no avail. That is, until the Legislature’s session this March, when lawmakers found common ground and revised the tax program.

The new rules would gradually introduce a more frequent payment schedule for energy companies and help eliminate the lag between when production occurs and when taxes are settled. 

But during the Legislature’s Joint Revenue Committee meeting held Tuesday, confusion immediately cropped up over which government agency — county treasurers or the state’s revenue department — would be responsible for rolling out the new tax schedule. 

Department of Revenue Director Dan Noble opened the conversation with lawmakers Tuesday, admitting he was unaware his agency was ultimately asked to facilitate the transition to the monthly tax payments. 

“I’m a little bit concerned about that, and there is a little bit of a quandary as to how this is going to be administered going forward,” Noble said. “This is certainly something that I was not aware of.” 

If the Department of Revenue is in fact responsible for facilitating the transition period, “we’re a little behind the eight ball,” Noble added. 

The Legislative Service Office declined to comment or directly interpret the intent of the legislation. 

However, following Tuesday’s discussion, Noble likely came away with a clearer understanding of best next steps for administering the legislation, LSO attorney Josh Anderson wrote in an email. The revenue director offered to meet with county treasurers next week to discuss the matter further. 

Meanwhile, some counties have already started to discuss the logistics of sending out notices to companies in anticipation of an impending payment due in October, according to Campbell County Commissioner Rusty Bell. 

“I really did believe this was going to be on the counties and then I come to find out the language actually says it’s the the Department of Revenue,” Bell said Tuesday. 

Despite his surprise, he said the county would like to work on implementing the new tax program, even if it is in collaboration with the state. 

Since Tuesday’s discussion, Johnson County Commissioner Bill Novotny said he had reviewed the engrossed bill against the Senate amendments and the enrolled act with several parties to root out any potential technical problems. After consultation with the Wyoming County Commissioners Association, Campbell County Commissioners, the commissioners’ counsel and his civil deputy, Novotny stood by the version of the legislation discussed Tuesday. 

“I believe it is correct,” he told the Star-Tribune. “Put simply, the Department of Revenue and County Treasurers both have a role and obligation in the payment process. “No one said that the transition to monthly ad valorem payments would be an easy lift,” he added. 

Johnson County is currently owed over $20 million in unpaid ad valorem taxes, according to the commissioner. 

Regardless of Tuesday’s initial confusion, the push to keep the new law moving forward was on full display from county officials. 

The terms of transitioning to the new tax plan are complicated, filled with multiple payment schedules and rates to ease the burden on energy companies. Several lawmakers emphasized the need to implement the new tax timeline in a timely and accurate manner. 

“We need to figure this out fast,” said Sen. Cale Case, R-Lander. 

Industry groups have been much less enamored with the forthcoming tax changes. The implementation of the new rule could send a blow to those already contending with cutthroat market conditions and thinning cash reserves. 

Though some operators have requested a delay of the new tax structure in light of the COVID-19 pandemic, Travis Deti, executive director of the Wyoming Mining Association, said he did not think that was necessary. He did, however, ask for greater clarity on the transition period. 

“We will have companies that will have a tough time doing this,” Deti said. “In order to facilitate this transition, communication is key.” 

Pete Obermueller, president of the Petroleum Association of Wyoming, defended the state’s oil and gas operators, especially the majority already abiding by the tax laws and paying taxes, royalties and liabilities on time. 

Oil and gas operators missed just 1 percent of all ad valorem taxes owed between 2009 and 2019, according to Obermueller. During that same time, oil and gas operators paid $5.9 billion in ad valorem taxes to Wyoming counties. 

“I think my operators would agree, in terms of tax burden, the ad valorem tax is the highest burden,” Obermueller said. “... Because of legislation you just passed, a company’s production from part of the first half of 2019 will come due in October. Companies are in a very different situation today, or will be in October, than when those minerals were produced.”