CHEYENNE — Revenue from a bill that would remove the tax exemption for flared natural gas wasn’t worth facing lawsuits, a majority of state legislators on the Joint Revenue Committee concluded on Tuesday
Flaring involves burning gas during the installation of an oil well. Bruce Hinchey, Petroleum Association of Wyoming president, argued Tuesday before the committee that the draft legislation would lead to years of litigation challenging its constitutionality. The association is the trade group for oil and natural gas companies in the state and lobbies on their behalf.
Hinchey said it puts a value and a tax on a product that is not processed or sold, which is not allowed by the Wyoming Constitution.
Hinchey noted that a relatively small amount of gas is flared. A report compiled for the committee estimated that removing the exemption would result in about $300,000 in revenue per year from the 6 percent severance tax on gas.
Hinchey said the petroleum association has “huge concerns” with the bill, particularly given the number of new oil wells coming on line.
If there is no gas pipeline or gas processing plant in the area, producers must flare the gas produced with the oil for safety, he said.
Some well operators in the Big Horn Basin, he said, have been flaring gas for years because the nearest gas pipeline is 30 to 50 miles away.
“This bill affects all wells and takes away authority from the [Wyoming] Oil and Gas Conservation Commission,” Hinchey said.
Rep. Mike Madden, R-Buffalo, the committee co-chairman, countered that the amount of revenue will increase with additional oil well drilling.
He also said the bill merited support from the aspect of good tax policy.
The bill failed on a 2 to 8 vote with Madden and Sen. Cale Case, R-Lander, casting the yes votes.
The bill had the support of the Powder River Basin Resource Council, the Equality State Policy Center and the Wyoming Education Association.
Shannon Anderson of the resource council said there is increased gas flaring from oil wells, particularly in eastern Wyoming, under the authority of the state Oil and Gas Conservation Commission.
Anderson said the state has a constitutional obligation to take advantage of a one-time opportunity to collect taxes on the gas, a nonrenewable resource.
The committee’s other co-chairman, Sen. Ray Peterson, R-Cowley, said he feared the bill would discourage oil development.
Case, though, said he was not convinced the tax would break the back of the oil industry. Case and other committee members mentioned receiving emails from Converse County residents who complained about the light, noise and odor from the oil wells in their area. One woman, Case said, sent a picture of her garden, which she claimed was killed by the natural gas vapors.