SHERIDAN — Mineral companies owe more than $42 million in delinquent taxes to 12 Wyoming counties, mainly as a result of companies declaring bankruptcy and not paying the counties, according to a recent report by the Powder River Basin Resource Council.
“During bankruptcy proceedings, back taxes to counties are by law low priority in repayment,” the report says. “Counties are treated as unsecured lenders, and come in line behind private, secured lenders such as banks. If companies have more debt than they can pay off, debts to counties are left unpaid.”
Powder River Basin Resource Council organizer Hesid Brandow wrote most of the report after working with county treasurers and organizing the tax totals.
“We didn’t hit every county in Wyoming, but we did hit a lot of those with major extraction,” Brandow said. “It turns out that it’s pretty well across the board. With everyone we talked to, this is a major issue.”
Of the 12 counties in the report, Campbell County has by far the most unpaid taxes, more than $26 million. Sheridan County is second with about $7.46 million in delinquent mineral taxes, most of which come from two companies.
Storm Cat Energy Operating Corporation owes about $6.15 million and Summit Gas Resources, Inc. owes just short of $750,000. Storm Cat declared bankruptcy in 2006 and again in 2016, while Summit Gas is still in operation.
The main reason for unpaid taxes is the county payment schedule, which has about an 18-month delay. For counties, however, taxes from the first six months of the year are due Nov. 10 of the following year, and taxes from the second half of the year are due two calendar years later by May 10.
“A lot can happen in 18 months,” Sheridan County Administrative director Renee Obermueller said, noting that a company can change its name, merge with another company, sell its property or file for bankruptcy.
The state severance tax payments, for comparison, are due on the 25th two months after, meaning taxes from January are due by March 25. The quicker turnaround leads to significantly less unpaid taxes owed to the state.
The delinquent mineral taxes affect other aspects of Wyoming life. Around 75 percent of mineral taxes are redistributed from counties to a state fund and given out to school districts across the state. The rest of the taxes help pay for other public services, including snow plows, fire department materials and road maintenance and repair.
That means six- and seven-figure amounts of money are owed to several educational entities in Sheridan County. According to the Sheridan County Treasurer’s Office, Sheridan County School District 2 is owed the most, around $1.65 million. SCSD3 is owed about $750,000, Sheridan College is owed around $430,000 and SCSD1 is owed about $120,000.
Delinquent mineral taxes in Sheridan County date back to 2003. The amount of unpaid taxes ramped up after the coal bed methane bust around 2010, Sheridan County treasurer Peter Carroll said.
The only way to get unpaid taxes back is through the legal system, a lengthy and costly process. Sheridan County does not have any pending litigation.
To decrease the amount of unpaid mineral taxes, the Powder River Basin Resource Council report recommended four policy changes: counties will collect ad valorem taxes monthly; counties will have continual and perpetual liens on ad valorem taxes; a state funding pool will be established to assist counties during bankruptcy proceedings and legislation will be passed so the status of a company’s state and county tax debt in Wyoming can be checked before it sells or transfers assets.
Brandow said she has mostly received positive feedback on the recommendations. Most people agree that something needs to change and that the recommendations are reasonable.
“Instead of just coming up with questions, they came up with answers,” Carroll said.
The PRBRC is not the first group to propose these types of recommendations. A 2016 bill that would have structured ad valorem taxes more like severance taxes over a two-year timespan died in the Legislature. A bill in 2017 that would have made it easier for counties to collect debt in bankruptcy court passed the House but died in the Senate. This year, a bill will be presented to the Legislature and proposes that counties should not be liable for unpaid taxes from a taxpayer.
Craig Grenvik, administrator of the Mineral Tax Division of the Wyoming Department of Revenue, said major corporations are rarely late on taxes, evident by the state receiving 99.98 percent of payments on time.
“There will be disputes on how much they owe, but the major corporations really are responsible,” he said. “What they think they owe, they pay it.”
Despite the bill proposals dying in recent years, Brandow remained hopeful and said the issue was not unsolvable.
“The solutions we line out are pretty simple,” Brandow said. “This is actually kind of an easy fix, but it’s only an easy fix if we’re proactive and we pursue these kinds of solutions.”
Until those fixes are made, though, millions of dollars in taxes remain delinquent.