Getting More Back From Extractive Industries

The Casper Star Tribune has an interesting piece about the prospect of raising taxes on extractive industries. In Wyoming, the state's mineral taxes have generated a huge budget surplus which Democratic Gov. Dave Freudenthal is using to seriously invest in his state's future.

What's interesting about the story about taxes is that the idea of raising taxes is coming from a Republican. Specifically, the story notes that "State Sen. Cale Case, R-Lander, said he believes states could increase taxes modestly without slowing down drillers much." Case, who holds a Ph.D. in resource economics from the University of Wyoming (UW), is the one who "persuaded fellow legislators to commission a series of studies of oil and gas taxes in the state" back in 2000. UW economists found that "doubling Wyoming’s severance tax would increase tax collections by 90 percent, while causing the state’s total production over the next 40 years to drop by only 6 percent." Other states would see the same effect, the economists concluded.

In his own way, Case is debunking a huge lie: namely, that higher taxes on industries will automatically devastate production. As he says, "Our taxes have so little to do with anybody’s decision; the market price (of oil and gas) is the determinant, both for exploration and for increasing production from older wells." And he says "It’s clear from our analysis that these resources in Wyoming would sustain higher taxes - it’s not going to affect the behavior of the producers, and the state would reap more money."

To be sure, we need to invest more in renewable, cleaner energy (and Wyoming is doing that). But in the near term, many Rocky Mountain states still rely on extractive industries. That means we need policies that not only make sure extraction is done in an environmentally safe way, but that we get the most out of those extractive industries for ordinary people - and not just for huge corporations.

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