Wyoming stands to lose $50 million annually because the Trump administration is relaxing royalty rates on the coal industry. But the hope is that money will be gained, and then some, with a ramp up in production.
The backbone of Wyoming’s economy is fossil fuels, especially coal. It’s state principal economist Dylan Bainer’s job to track trends. He’s digging into the One Big Beautiful Bill Act (BBB), the federal tax law recently signed by Pres. Trump.
“The goal of this bill is to try to really push fossil fuels and coal,” Bainer said, “and try to incentivize people to produce, and as he [Trump] said, ‘Drill, baby, drill.’”
Bainer added, “On the surface, [that] sounds great for Wyoming, but in the way that it is being done is going to negatively impact our revenues.”
When coal is mined on federal land, companies have to pay a fee back to the feds and the state. It's called a royalty rate. The new law drops the rate from 12.5% to 7%. Bainer said quick math based on past production years would leave Wyoming’s piece of the pie at about $50 million less.
But Bainer said the goal is that a reduced rate would incentivize industry players to produce more, which would have other positive economic impacts.
“That would lead to maybe a ripple effect in terms of restaurant activity, lodging activity, stuff like that, retail activity,” Bainer said. “Will this stimulate it enough to counteract that loss in revenue from the rate decrease? I'm not so sure.”
Because coal is Wyoming’s top industry, its revenues touch just about everything, like schools, roads, law enforcement and healthcare. Specifically, one third from Wyoming’s portion of the federal royalty rates goes into the Wyoming School Foundation Program (SFP). The other two-thirds goes into the state’s general fund.
Wyoming’s general fund is forecasted to be sitting at about $1.4 billion at the end of the fiscal year. The SFP should be at about $500 million.
Impacts to these accounts from federal royalty rates on oil and gas is less clear. The BBB dropped the rates from the 16.67% set in former Pres. Biden’s Inflation Reduction Act to the previous rate of 12.5%. Bainer said this only applies to new wells, so the financial impacts won’t be as stark to Wyoming’s pockets.
“But over time, five to 10 years down the line, as more and more wells are being drilled, the rate decline could certainly have a more significant impact on state revenue,” he said.
Wyoming’s accounts have been impacted by energy revenue before. Grappling with less income from coal is nothing new for the state, as global demand has declined for well over a decade now.
