(The following column by Dustin Bleizeffer appeared on the Casper Star-Tribune website on January 20.)
CASPER, Wyo. — “If we could raise our rates 7 percent, 8 percent, and still maintain our market, then shame on us. We should have done it years ago.”
BNSF Railway CEO Matt Rose said this to a group of reporters aboard a passenger train this past fall while rolling down the triple-track line in the southern Powder River Basin. And it got me to thinking.
Is Wyoming asking a good business price for its finite fossil fuels?
Raising severance taxes on coal, oil and natural gas has long been a taboo subject in the Cowboy State. But I sometimes wonder if it wouldn’t be good business practice to crunch the numbers once in a while to remind us why.
Consider this. It took decades for Wyoming miners to build up a $500 million Abandoned Mine Lands pot that the federal government still holds hostage from Wyoming. But it only took a year — 2007 — to lose an estimated $470 million in unrealized revenues due to limited natural gas pipeline export capacity.
That loss hasn’t inspired the hue and cry we’ve heard over the AML fund. So far, the response has been to offer natural gas producers here a monetary “incentive” to more quickly sign long-term contracts for more pipe.
State officials are well aware that the same drain is highly possible in 2011, when production is forecast to again overrun pipeline capacity. Yet there’s been no discussion about playing a defensive role.
For example, I have not heard any suggestion that the state should consider going on the defensive by imposing a 2 percent severance tax increase on all natural gas volumes left prone to the daily price index. The idea there is to let the producers take the hit when production overruns available pipeline capacity.
When the idea was mentioned to Gov. Dave Freudenthal, he was stumped — an unusual thing for our governor. It had never even crossed his mind.
Maybe it’s a bad idea.
The general argument against raising severance taxes is that the national and international corporations that bring wealth to Wyoming by exporting its fossil fuel resources have plenty of other places in the world to chase coal, oil and natural gas.
As long as coastal states refuse to allow off-shore drilling, the Rockies will remain the only growing production region in the states.
Mongolia, I’m told, has a huge coal resource — much like the Powder River Basin’s — that China and India eagerly want to tap. But so far, there’s only a two-track road leading to the resource.
The same comparison might be made between Montana and Wyoming. Wyoming has 35 years worth of infrastructure and work force in place.
BNSF Railway and Union Pacific Railroad certainly didn’t pull their poker chips out of Wyoming when climate change pressures began to mount two years ago. Instead, they spent more than $1 billion to beef up their coal transportation systems, focusing on Wyoming’s Powder River Basin.
Rising rail transportation costs and the delivery of other commodities from Wyoming to distant markets certainly are factors when these companies decide where to spend their capital. But are Wyoming officials crunching the numbers?
Could Montana Gov. Brian Schweitzer woo coal producers and railroads to his state if Wyoming demanded a bigger cut on its mass-produced coal?
It only gets more expensive to chase coal deeper underground in Wyoming, after all. But do Montana and the Eastern coal-producing states get a break on the rising costs of diesel, steel and labor?
I didn’t go to business school, and I’m certainly not an accountant. I’m pretty sure a very large majority of Wyomingites don’t want to tax these industries out of the state. But can somebody remind me why raising severance taxes isn’t even part of the discourse in Wyoming?
Matt Rose is obviously a good businessman. He’d be embarrassed to find out he could have been charging more for his services all along. Shouldn’t Wyoming do the math to ensure that it’s doing good business, too?