The composition of Wyoming’s state revenue is undergoing significant transformation as it diversifies away from its traditional dependence on coal and minerals.
For nearly a decade, coal and other minerals constituted over half of the state’s assessed valuation. However, this has changed dramatically in recent years, with new revenue streams becoming increasingly vital to the state’s financial health.
According to a recent report from the Consensus Revenue Estimating Group (CREG), federal mineral royalties and mineral severance taxes have collectively surpassed 40% of contributions to Wyoming’s General Fund only once in the past decade. In the last fiscal year, these mineral-related revenues accounted for just 28% of the General Fund. This gradual decrease reflects Wyoming’s ongoing economic shift, as state leaders acknowledge the importance of diversified revenue sources.
“Wyoming’s revenue structure is becoming more diversified,” said Don Richards, co-chair of CREG.
He pointed out that while minerals remain significant, other revenue avenues are steadily growing in importance. Specifically, oil and gas, state investments, and sales and use taxes have become essential in filling gaps left by declining coal revenues. However, this diversification comes with new challenges, especially given the high volatility of oil and gas markets compared to coal.
In his presentation to the Legislature’s Joint Appropriations Committee, Richards explained that while coal has historically served as a stable revenue source, Wyoming now leans more heavily on oil, gas, and investments, which are less predictable. Oil production, in particular, has emerged as a major contributor, with oil prices remaining relatively high and production increasing by roughly 10% despite fewer operating rigs. Efficient extraction methods are allowing Wyoming to yield more oil per well, yet prices are highly susceptible to global factors like Middle Eastern geopolitics and China’s energy demands.
The state’s fiscal outlook is closely tied to these oil market dynamics, Richards explained. With oil prices forecasted around $70 per barrel, a $5 fluctuation could mean a revenue difference of approximately $50 million annually. Should prices diverge by $10 from projections, the revenue gap could exceed $200 million over two years—a substantial financial swing for Wyoming’s budget.
Natural gas, another key component of the state’s evolving energy portfolio, also displays significant price variability. While recent prices have hovered close to CREG’s projections, fluctuations in supply and demand, coupled with seasonal influences, could impact revenue stability. Additionally, Richards noted the regional pricing challenges that Wyoming faces, as much of its gas is sold at lower rates from the Cheyenne Hub compared to the Opal Hub.
Meanwhile, Wyoming’s coal industry continues to decline, with forecasts indicating production may dip below 200 million tons this year—a first in three decades. Although coal has historically been a cornerstone of Wyoming’s economy, the state’s dependency on it is waning as CREG anticipates further decreases in production. Richards attributed this shift to a combination of utility plant closures and reduced coal demand, which subsequently impacts sales tax revenues tied to mining equipment purchases.
Despite these changes, there are positive trends in other sectors. Wyoming’s sales and use taxes, particularly in lodging and online retail, have shown steady increases after two years of rapid growth. This reflects a broader resilience and adaptability within Wyoming’s economy, with retail and hospitality accounting for nearly three-quarters of sales tax revenue. While mining now comprises only 9-10% of sales tax revenue, the growing contributions from retail and hospitality underscore the state’s pivot towards more diverse revenue sources.
Thanks to stronger-than-anticipated investment returns, the state saw an additional $122 million in revenue last year, primarily from investments in the Permanent Wyoming Mineral Trust Fund (PWMTF). CREG noted that investment income from this and other state assets, alongside severance taxes and federal mineral royalties, significantly contributed to the General Fund and Budget Reserve Account.
The state’s diversified approach, while promising, is not without risks. Chairman and Senate Vice President Dave Kinskey highlighted that Wyoming’s budget remains one of the most susceptible to the volatility of energy-related revenues, given its strong ties to oil, gas, and investment earnings. Still, Richards emphasized that Wyoming is better positioned than states like Alaska and North Dakota, where economies are more heavily reliant on oil alone.
Gillette News Record and Buffalo Bulletin contributed to this report.
