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Proposed oil and gas tax breaks for new development could decrease Wyoming revenues by $24 million over two years

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CASPER, Wyo. — The Wyoming House of Representatives passed a bill on first reading during their Tuesday, Feb. 25 floor session which would create some new temporary tax breaks on crude oil and natural gas produced in the state.

House Bill 243 would create partial severance tax exemptions on oil and natural gas produced from new drilling in an effort to encourage such new drilling.

The Wyoming Legislative Service Office estimates that the tax exemptions would reduce state revenue by $12 million in both fiscal year 2021 and 2022. In fiscal year 2023, the estimated revenue decrease for the state is $3.6 million.

New crude oil and natural gas production from wells drilled on or after Jan. 1, 2020 would see a 2% severance tax exemption from the 6% severance tax on such production. That exemption would last for the first six months of production. A 1% exemption would take effect for the next six months.

“The exemption would not apply to crude oil production when the 12-month rolling average of the West Texas Intermediate (WTI) spot price of sweet crude oil is $55/barrel or more at the time of production,” a fiscal note of the legislation explains. “The exemption would not apply to natural gas production when the 12-month rolling average of the Henry Hub spot price is $2.95/MCF or more at the time of production.” 

“All oil and gas production from wells drilled after January 1, 2020 sold at the Consensus Revenue Estimating Group’s (CREG’s) current price forecasts for crude oil and natural gas in FY 2021 and FY 2022 would be eligible for the severance tax exemption in the bill. All gas production from wells drilled after January 1, 2020 sold at the CREG current price forecast for natural gas would be eligible for the severance tax exemption through FY 2023.”

For wells drilled on or after July 1, 2020, the bill would increase the severance tax rates on crude oil and natural gas under some circumstances.

“The bill increases the severance tax rate by 2% on crude oil production from wells drilled on or after July 1, 2020 when the 12-month rolling average of the WTI spot price of sweet crude oil is $80/barrel or more at the time of production,” the fiscal note explains. “The bill increases the severance tax rate by 2% on natural gas production from wells drilled on or after July 1, 2020 when the 12-month rolling average of the Henry Hub spot price of natural gas is $3.50/MCF or more at the time of production.”

“The additional tax would not apply for more than 24 months. No crude oil or natural gas production from wells drilled after July 1, 2020 sold at the CREG’s current price forecasts for crude oil and natural gas would be subject to this tax increase.”

The bill is sponsored by Speaker of the House Steve Harshman and House District 15 Representative Donald Burkhart, Jr.

The House would need to pass the bill on two further readings in order for it to move to the Senate for consideration.

NOTE: A previous version of this article said that the bill was proposing a tax increase on new crude oil and natural gas production. That is incorrect as the bill proposes 2% severance tax breaks on new production. The article also said that the Legislative Service Office anticipated revenue gains for the state. In the LSO’s fiscal notes on bills, figures within parentheses indicate estimated decreases rather than increases. The article has been corrected. Oil City regrets this error.


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This article originally appeared on Oil City News. Used with permission.


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