Taxable sales fall in first quarter
CASPER — Despite skyrocketing fuel demand driving oil and gas prices to highs not seen since 2014, Wyoming’s energy sector continues to chart a slow recovery from its pandemic lows.
Mineral severance taxes in the first quarter of 2021 increased compared with the first quarter of 2020, and business is once again booming in the retail, motor vehicle and food service sectors.
But taxable sales in the natural resource extraction industry were down by more than half compared with the first quarter of 2020 amid stalled energy exploration and development, contributing to a 4.9-percent drop in total taxable sales in Wyoming, according to the latest Wyoming Economic Summary Report.
“About 20 percent of total sales tax is from mining, paid by the mining business,” including oil and gas, said Wenlin Liu, chief economist at the Wyoming Department of Administration & Information.
When development ceased, that tax revenue stopped flowing into the state.
The U.S. economic recovery from the pandemic outpaced industry projections, and prices rose when demand for fuel increased faster than the industry was able — or willing — to adjust supply. After last year’s collapse, and in an industry that is always volatile, producers are reluctant to expand operations too quickly as they wait to see whether prices hold steady.
And when that growth does happen, it can take a while.
“It’s an expensive operation, for drilling,” Liu said. “They need to get together the investments. Capital expenditure for the investors, it takes some time. That’s why drilling has been very slow, and that’s why you can see mining sector employment is down almost 30 percent compared to last year, which is over 5,000 workers.”
Because a greater share of Wyoming’s budget comes from resource extraction compared with other states, its economy is rebounding more slowly than the national average.
The state’s drilling rig count — a measure of industry growth — has continued to rise since the first quarter of 2021. It currently stands at nine.
“Revenue flow is strong now,” Liu said. “Hopefully, producers gradually start to increase their drilling activities, if the current price can maintain for a while.”
While there was virtually no change in taxable sales in Natrona County across quarters, several counties, including Converse, Campbell and Niobrara, saw taxable sales decrease by as much as 51.5 percent, largely because of reduced oil and gas development, as well as delayed extraction-related construction, including pipelines, Liu said.
But when the pandemic hit, Campbell County was prepared for the budget crunch.
“Our county and city are accustomed to some ups and downs,” said Commissioner Rusty Bell.
According to Bell, the industry’s ongoing recovery is visible in the county as new development brings jobs back to communities.
“Things are pretty good,” he said. “In fact, some of the mines are hiring. I’ve seen oilfield people hiring. I see all kinds of businesses hiring right now — they can’t find enough employees.”
Though the short-term outlook is strong for the resource extraction sector, Liu emphasized that the current boom is only temporary, and demand for fossil fuels is still expected to decline in the coming years.
For Campbell County, investing in long-term economic prosperity means continuing to support research into carbon capture and alternative uses for coal.
“We’re positioning ourselves to change and adapt to a changing and adapting world,” Bell said.