Pausing the Sale of New Oil and Gas Leases on Federal Lands Will Help Wyoming's Economy—Here's How.
The state of Wyoming is currently facing a roughly $250 million yearly deficit in education funding. A significant portion of the state’s revenue comes from the taxes Wyoming levies on mineral production and disbursements shared by the federal government from leasing and royalties from federal fossil fuel production. A large portion of this revenue funds public education in Wyoming.
On January 27th, the Biden administration signed an executive order effectively suspending new leases for oil and gas drilling on federal lands. This moratorium raised concerns that suspending these new leases would exacerbate the state’s financial crisis and, in so doing, hurt education funding. To put things into perspective, in 2019, revenue from oil and gas in the state of Wyoming contributed roughly $740 million to K-12 education and $28 million to the University of Wyoming and Community Colleges.
Though Wyoming leadership, including the Governor and Superintendent of Public Instruction, were vocal in their concerns about detrimental economic impacts that this moratorium could bring about, those concerns have not been validated. In fact, reevaluating oil and gas leases on federal lands has the potential to increase revenue collected by the State of Wyoming and encourages Wyoming’s electorate and leadership to diversify our economy away from over-reliance on unsustainable legacy energy industries.
The Biden administration’s temporary moratorium on leasing public lands for oil and gas was implemented both as a means to combat climate change and global warming and to provide the Department of the Interior the opportunity to perform a review of leasing practices and policies on federal lands. According to a Taxpayers for Common Sense report, Wyoming lost out on roughly $2 billion in additional revenue between 2010 and 2019 because of the century-old royalty rate that oil and gas companies pay for production on federal lands.
According to this report, the state of Wyoming and private landowners “frequently charge more than the federal government for drilling on their land.” Even the federal government charges higher rates for drilling in federal waters. The report goes on to state, “If oil and gas producers in Wyoming had paid the federal offshore royalty rate for production on federal lands over the last decade, taxpayers – the owner of these resources – would have collected approximately $4 billion more.” The Office of Natural Resources Revenue (ONRR) would have collected approximately $4 billion in the state of Wyoming, of which $2 billion would have dispersed back to the state from the ONRR. A substantial amount of these dollars would have gone to fund public education in the state of Wyoming, providing much-needed resources for Wyoming students.
Public policy is a response to a perceived or real problem. The recently-released Intergovernmental Panel on Climate Change (IPCC) report from the United Nations reinforces the findings of decades of accumulated evidence and scientific consensus proving that global warming and climate change are human-driven by our continued reliance on oil, gas, and coal. This continued reliance will have dire consequences for our planet and humanity.
From a state perspective, WEA has long advocated that Wyoming must diversify its economy and that leadership should recognize its role in a global solution for energy and environmental policy. WEA advocates that doing so responsibly could help provide stable sources of revenue needed to fund education, allowing the state to continue to provide the constitutionally mandated high-quality education that our students deserve.
When this moratorium was signed, crude oil was going for $52.85 a barrel, and only five rigs were operating across the state. As the COVID-19 outbreak stalled travel, the price of oil and Wyoming’s active rig count plummeted. Today, there are three times as many operating rigs in the state of Wyoming as there were in January. The price of oil has sustained between $67 and $75 per barrel since June. The state of Wyoming has increased production in the last seven months, and the state has benefited from the increasing price of oil during the same period in which this moratorium has been in place.
A report published by the Conservation Economics Institute (CEI) earlier this month finds that the temporary moratorium on leasing public lands for oil and gas development has negligible economic effects. The reason being that the moratorium deals strictly with new oil and gas leases on federal land—not existing leases. The state of Wyoming, over the past few years, has been the region’s largest purchaser of federal drilling leases. According to CEI’s director Evan Hjerpe, over 2,500 leases were sold in Wyoming between 2016 and 2020, making up “5 million of the 7.7 million federal acres leased for drilling in the Intermountain West during the last five years.” These existing leases provide the state of Wyoming a stockpile of minable leases that will provide “an estimated 67 years of drilling opportunities on federal lands at historical levels of regional oil and gas development.” The report notes that this figure does not account for the “many years of drilling opportunities available from existing federal leases that are producing yet not fully developed.” This backlog of existing leases ensures that the moratorium cannot have any immediate detrimental impact on the state of Wyoming.
As demand for oil and gas increases, rig counts across the state of Wyoming increase. This demand also increases oil prices. It is important to note that oil and gas employment in Intermountain West states like Wyoming correlates to oil price trends and is not correlated with new federal leases. Ultimately, this means that Wyoming’s extraction industry employment is related to market forces, not federal regulation or the moratorium.
As the world seeks to eliminate carbon pollution from its energy sectors and achieve net-zero economies, Wyoming must grow and evolves to ensure our continued economic viability as a state. Doing so will secure our financial future—it will secure our ability to continue to fund high-quality public education and foster a well-educated, adaptive workforce that will thrive in a world powered by the help of clean, sustainable energy sources.
Note: a study produced by the University of Wyoming’s Dr. Tim Considine, which Wyoming leadership has referenced to substantiate claims that this federal moratorium will negatively impact Wyoming’s economy, fails to consider Wyoming’s stockpiled leases. It also demonstrates a lack of model sensitivity to the fact that drilling activity is sensitive to price, and relies on the poor practice of incorporating multiplier effects into projections.