Volume 3, Number 4 - April 24, 2003
brought to you online by Pinedale Online
The importance of petroleum
The Petroleum Association of Wyoming is Wyoming's largest and oldest oil and gas trade association, members of which account for over 90 percent of the natural gas and over 80 percent of crude oil produced in the state.
The petroleum industry has been exploring for oil and gas in Wyoming for more than 118 years. Taxes from the oil and gas industry help build our roads, contribute to our schools and employ many of our neighbors and friends while helping to keep our property and personal taxes low. Wyoming's petroleum industry directly employs nearly 21,000 people with an annual payroll of over $804 million. The taxation on Wyoming's minerals is a primary reason Wyoming is able to avoid a state personal income tax. In fiscal year 2002, oil and gas production contributed a total of $905.3 million to state and local governments. That works out to a direct payment of nearly $1,900 for every person living in Wyoming.
Oil and gas in Wyoming accounted for over 44 percent of the total property taxes levied and more than 74 percent of the property taxes levied on all minerals in 2001. In fact, for fiscal year 2002, the oil and gas industry (production plus equipment) made up nearly 53 percent of the state's total taxable valuation.
The reason behind such high valuation is that minerals are the only class or kind of property in Wyoming valued and taxed at 100 percent of their actual value. A hypothetical example would be if you were to purchase a $100,000 home, the assessment rate (the amount your taxes would be based) on that home would be 9.5 percent, the mill levy would be 0.07, making your taxes due $665. Use that same $100,000 and invest it in oil and gas properties. Because oil and gas properties are valued at 100 percent, a mill levy of 0.07 would yield a tax of $7,000 as compared to a tax of $665 on a home. In 2002, oil and gas contributed $314.4 million in property taxes to Wyoming.
Severance tax is levied by the state for "severing" a mineral from the earth. Severance taxes are levied regardless of the ownership of the surface. Currently, a 6-percent severance tax rate applies to crude oil and natural gas production ("stripper" or tertiary oil production is taxed at 4 percent). In the year 2001, oil and gas production paid over $267 million, or about 70 percent of all severance taxes paid by minerals. These taxes are paid to the state and are distributed to the general fund, the permanent mineral trust fund, schools, cities, towns, highways, counties and the water-development funds. In 2002, oil and gas contributed $267.1 million in Wyoming severance taxes.
In addition to property and severance taxes, oil and gas operations pay mineral royalties when the federal government or the state owns the land where the mineral is being produced. The State of Wyoming receives one-half the royalties paid to the federal government for leasing, production and fees on federal lands. The typical royalty rate on state leases is 16 2/3 percent and on federal lands 12 1/2 percent. Royalties are distributed to accounts for schools, highways, cities and towns and the University of Wyoming. In 2002, oil and gas contributed $251.5 million in federal royalties and $33.9 million in state royalties.
The nation's appetite for more fuels and electricity continues to grow. We want to become a more energy-independent country, and as a consequence the nation has turned to the Rocky Mountain region to help achieve this goal. The Bureau of Land Management is the agency responsible for managing and leasing federal surface and minerals. The BLM has several offices throughout our state and they are currently in the process of updating their Land Use Plans (LUPs).
These LUPs basically direct the BLM on how they will manage the resources for the next several years. It is becoming more evident the BLM is willing to work with local and state governments when deciding these plans. What also is becoming clear is the importance for Wyoming to be sure mineral leasing and development is allowed to continue on federal surface and federally owned minerals.
The future of Wyoming and our economy depends on the minerals industry to be able to continue to lease and develop on federally owned property.
Please encourage your local governments to get involved in these planning processes by becoming a cooperating agency. This will allow your voice to be heard as you have a representative at the table when its decision time.
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