Royalty Rollback: Wyoming weighs a $50M hit vs. a coal boost

Passed in July, the sweeping “Big Beautiful Bill” did a lot of things, but one change looms largest for Wyoming: a 44% cut to the federal royalty rate on coal. Supporters say that’ll juice production. Critics see a roughly $50 million-a-year hole in state revenues, Casper Star-Tribune reports.

The law also trims federal royalties on new oil and gas production, though analysts expect a smaller impact on the state’s bottom line than coal’s cut.

Columnist and former state lawmaker Rodger McDaniel didn’t mince words. That $50 million loss, he wrote, piles onto shrinking property tax collections and “disrupts the capacity of local governments to provide basic services.” He blasted Wyoming’s congressional trio — Sens. John Barrasso and Cynthia Lummis and Rep. Harriet Hageman — for backing the bill:

“A fundamental failure… to protect Wyoming’s interests in Washington.”

Hageman, for her part, cheered the change in a recent Instagram segment, calling it a return to pre-COVID royalty levels.

“We have one coal company in Wyoming that’s saving $15 million in just the remainder of this year,” she said — money she argues can be plowed back into operations, workers, and new permits.

Not everyone in Cheyenne is celebrating. Sen. Tim Salazar (R-Riverton) and Rep. John Bear (R-Gillette), who co-chair the Legislature’s Joint Appropriations Committee, asked the delegation to rethink the cuts. Still, all three members ultimately voted for the bill without pushing to revise the royalty reductions.

Here’s the revenue math: federal mineral royalties — separate from state-assessed mineral taxes — are typically split 50/50 between Washington and the states. In Wyoming, that money helps pay for highways, K-12 schools, the University of Wyoming, and city and county services. Barrasso argues cutting the take will spur production and grow the pie.

“This law empowers states to produce more energy,” he said on the Senate floor. “It cuts red tape; it creates opportunities for our energy producers.”

Wyoming’s tax system complicates the picture. Minerals are taxed at 100% of value; industrial property at 11.5%; everything else (including homes) at 9.5%. Because those categories are linked, lower homeowner taxes can ripple into lower mineral and industrial taxes — and changing that setup would take a constitutional amendment.

The state’s Consensus Revenue Estimating Group (CREG) pegged the coal royalty cut’s impact at about $50 million less for Wyoming each year, depending on production. Some of that could be “modestly offset,” the report said, by higher severance and ad valorem tax payments as companies deduct a smaller royalty bill — but the offset is small compared to the lost federal royalty revenue.

Local effects will vary. Fremont County, for instance, saw state-assessed mineral values drop sharply around 2016 and isn’t as dependent on mineral income as some neighbors. Assessor Tara Berg has said minerals no longer make up a majority of county revenue. Translation: even if production ticks up statewide, places like Fremont may not feel a big local bump — while the statewide loss from lower royalties still lands.

Bottom line: the royalty rollback could make mining and drilling cheaper and busier. Whether that activity fills, or falls short of, an expected $50 million annual gap is the question Wyoming now has to live with.