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COMMITTE E ME E TING INFORM ATION October 28-29, 2013 Room 302, Capitol Building Cheyenne,

COMMITTE E ME MBE RS PRE S E NT Senator R. Ray Peterson, Cochairman Representative Michael Madden, Cochairman Senator (SD 28) Senator Senator Representative Gregg Blikre Representative John Eklund Representative Dan Kirkbride Representative Bunky Loucks Representative Ruth Ann Petroff

C OMMITTE E ME MBE RS N OT PRES ENT Senator Representative W. Patrick Goggles Representative David Northrup Representative Mark Semlek

LEGISL ATIV E SE RV ICE OFFICE ST AFF Mark Quiner, Assistant Director Josh Anderson, Staff Attorney Matt Sackett, Research Manager

OTHERS PRE S E NT AT ME E TING Please refer to Appendix 1 to review the Subcommittee Sign-in Sheet for a list of other individuals who attended the meeting.

The Committee Meeting Summary of Proceedings (meeting minutes) is prepared by the Legislative Service Office (LSO) and is the official record of the proceedings of a legislative committee meeting. This document does not represent a transcript of the meeting; it is a digest of the meeting and provides a record of official actions taken by the Committee. All meeting materials and handouts provided to the Committee by the Legislative Service Office, public officials, lobbyists, and the public are on file at the Legislative Service Office and are part of the official record of the meeting. An index of these materials is provided at the end of this document and these materials are on file at the Legislative Service Office. For more information or to review meeting materials, please contact the Legislative Service Office at (307) 777-7881 or by e-mail at [email protected] . The Summary of Proceedings for each legislative committee meeting can be found on the ’s website at www.wyoleg.gov. PAGE 2 OF 8

EXECUTIVE SUMMARY The Committee met for two days in Cheyenne. The Committee received testimony on State lands and received an update on the most recent CREG report. The Committee considered six bill drafts and ultimately voted to sponsor three bills as Committee bills: 14LSO-0155.W1 – Property tax exemption – charity; 14LSO-0158.W2 – County board of equalization; and 14LSO-0068.W3 – Mineral tax-audit interest rate.

CALL TO ORDER (OCTOBER 28, 2013) Co-Chairman Madden called the meeting to order at 8:30 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda.

14LSO-0155.W1 – PROPERTY TAX EXEMPTION – CHARITY The Committee received a copy of bill draft 14LSO-0155.W1 – Property tax exemption – charity (see Appendix 3 for a copy of the bill). Ms. Brenda Arnold of the Department of Revenue stated that the bill helps provide clarity for those administrating the law. She noted that the bill narrows the exemption for charitable trusts. She stated that the department did have some concerns about the reporting requirement because the department does not value exempt properties and the counties do not appraise exempt properties. She stated that if counties have to assess those properties it would require additional man hours.

Mr. Steve Olmstead, Chairman of the State Board of Equalization, stated that they had some concerns about tracking information. He noted that they have been tracking the present worth exemption since its inception and that information is available to the legislature.

Ms. Jayne Mockler of the State Board of Equalization noted that exemptions tend to come before the board on appeal because somebody will protest. She said that it is important to make sure the exemptions are written as clearly as possible.

Mr. Ken Guille, Laramie County Assessor, stated that there are over 20 properties in Laramie County that fall under this exemption but he was not sure of the total number statewide.

Senator Anderson moved that the Committee sponsor the bill and the motion was seconded.

Representative Petroff moved that the bill be amended on Page 1- line 18 by deleting "4-10-106" and inserting "4-10-406". The motion was seconded and passed by voice vote.

Representative Petroff moved that the bill be amended on Page 2- line 2 by deleting “and” and inserting “or”, and after "association" by inserting "which is directly beneficial to the people of this state". The motion was seconded and passed by voice vote.

Representative Petroff moved that the bill be amended on page 2-line 22 after "on the " by deleting the balance of the line and inserting “number of, name of and legal description of the property for any exemption under W.S. 39-11-105(a)(xix), (xxvi), (xxxix) or (xl)." The motion was seconded. The motion failed by voice vote.

Representative Petroff moved that the bill be amended by deleting section 2. The motion was seconded. The motion failed by voice vote.

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 3 OF 8

Representative Blikre moved that the bill be amended on page 2-line 22 by deleting “value of” and inserting "number of". The motion was seconded. The motion failed by voice vote.

The Committee voted to sponsor 14LSO-0155.W1 as amended as a House Bill with a roll call vote of 8 ayes, 2 noes and 4 excused. See vote form attached to the bill.

14LSO-0158.W2 – COUNTY BOARD OF EQUALIZATION The Committee received a copy of bill draft 14LSO-0158.W2 – County board of equalization (see Appendix 4 for a copy of the bill). The Committee also received a handout of an amendment to the bill (see Appendix 5 for a copy of the amendment). Mr. Olmstead stated that the bill raised some issues that the board felt needed brought to attention. He stated that while he thinks it generally works well in the present condition, if there were going to be changes it is important not to make the process of appealing property tax assessments more onerous for taxpayers. He noted that at this time the board has not been seeing a real problem related to this issue coming from the counties.

Ms. Mockler walked the Committee through the amendment. She noted that it provides some structural and procedural changes to clarify the county board of equalization

After additional discussion, Senator Emerich moved that the Committee sponsor the bill and the motion was seconded.

Representative Eklund moved that the bill be amended as provided in the amendment received by the Committee. The motion was seconded and passed by voice vote.

Senator Emerich moved that the bill be amended on page 3-lines 5 and 6 by deleting "without prejudice”. The motion was seconded and passed by voice vote.

Representative Petroff moved that the bill be amended by deleting the new language on page 4-lines 13 and 14. The motion was seconded and passed by voice vote.

The Committee voted to sponsor 14LSO-0158.W2 as amended as a Senate File with a roll call vote of 9 ayes, 1 no and 4 excused. See vote form attached to the bill.

14LSO-0069.W1 – TAXATION OF MULTI-COUNTY PROJECTS 14LSO-0175.W2 – SALES AND USE TAX CONSULTATION The Committee received a copy of bill draft 14LSO-0069.W1 – Taxation of multi-county projects (see Appendix 6 for a copy of the bill). The Committee also received a handout of an amendment to 14LSO- 0069.W1 (see Appendix 7 for a copy of the amendment). And, the Committee received a copy of bill draft 14LSO-0175.W2 – Sales and use tax consultation (see Appendix 8 for a copy of the bill). The Committee also received a handout of an amendment to 14LSO-0175.W2 (see Appendix 9 for a copy of the amendment).

The Committee received a handout of comments from the Department of Revenue regarding the two bills under consideration. See Appendix 10 for a copy of the comments.

Mr. Todd Parfitt of the Department of Environmental Quality stated that while the industrial siting council is tasked with organizing the meetings under 14LSO-0069.W1, it would make more sense to have the industrial siting division as the contact for that process. He stated that the main functions of the division under the bill would be to accept information, issue invitations to the counties and neighboring

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 4 OF 8 states, file a public notice and facilitate a meeting to discuss the tax implications. He noted that he was not sure if the bill would have a fiscal note because he was not clear on what was included in the universe of projects that would be subject to the bill.

Mr. Marion Loomis of the Wyoming Mining Association stated that in response to 14LSO-0069.W1 there are many projects that straddle county lines and he was very concerned with the 5 million dollar limit as companies would be required to go in and sit down and get an endorsement that the right counties would receive the money on many projects. He noted that there were also concerns on the requirement to provide notice to the newspapers because this is not something for the public to consider.

Mr. Bruce Hinchey of the Petroleum Association of Wyoming stated that the 5 million dollar threshold included in the bill is way too low.

Mr. Jim Huddleston noted that the idea for these bills arose out of a pipeline project which was exempt from industrial siting and so the counties received no impact assistance and no sales tax from the project because the pipeline company took possession of the materials in another state and that was where they were taxed. He noted that the idea behind the bills was to come up with some way where the destination county can get a benefit.

Mr. Bob Tarantola noted that because the Committee has talked about this it has elevated this issue and it is something that companies can consider going forward.

Ms. Jody Levin provided a handout to the Committee of a proposed amendment to 14LSO-0175 (see Appendix 11 for a copy of the handout).

Ms. Liz Zerga stated that telecommunications projects should be exempted because they are deploying fiber under mandates of the FCC and it was not the intent of the counties to grab telecommunications projects. Ms. Levin said that the intent of the amendment was to provide a definition on what those telecommunication projects are. Ms. Zerga noted that these projects have highly confidential contracts and they are small companies. She noted that most of the projects would be under the five million dollar amount but those that would exceed that amount would be very onerous to consider under either of these bills.

After additional discussion, both 14LSO-0069.W1 and 14LSO-0175.W2 died for lack of a motion.

CREG UPDATE Mr. Dean Temte of the Legislative Service Office provided 2 handouts to the Committee on the revenue forecast (see Appendix 12 for a copy of the handouts). Mr. Temte explained the handouts. He noted that there was not a lot of change to the bottom line. He noted that there were some changes to the mineral components and that severance taxes and federal mineral royalties are a big part of the revenue forecast. He stated that oil production increased but there were reductions in surface coal and natural gas. In response to a question, Mr. Temte noted that the investment income in the CREG report is actual realized investment income as CREG does not forecast capital gains.

EDUCATIONAL BRIEFING ON STATE LANDS Ms. Bridget Hill of State Lands provided handouts to the Committee on state lands (see Appendix 13 for a copy of the handouts). Ms. Susan Childs of State Lands walked the Committee through the handout. She noted that with state trust lands the State Board of Land Commissioners is the trustee and the beneficiaries are the public schools and others.

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 5 OF 8

Ms. Childs noted that natural gas flaring was not addressed in old lease language. As of 2011 the flaring policy was that it would not be denied as long as the flaring was approved by the oil and gas conservation commission. She said that if flaring was not in accordance with the policy the operator would be required to remit royalties on the flared gas. She noted that the new policy would require the operator to apply for permission to flare gas even if it is approved by the oil and gas conservation commission.

Ms. Childs noted that for acquisitions, sales or exchanges the priorities considered are whether the action would improve income, improve returns, improve diversification, improve appreciation, improve the natural resource, improve manageability or consolidate ownership. In response to a question, Mr. Jason Crowder of State Lands said that grazing is at a lower price though it represents a high volume of use. He noted that the rate used is a court approved rate.

Mr. Crowder stated that as the public has become more knowledgeable that State Lands is open to exchanges, they have brought more proposals to consider. He noted that all proposed exchanges go through an analysis process and can be turned down. He stated that the primary concern is to provide a benefit to the trust beneficiaries.

In response to a question, Ms. Hill noted that under the open meetings act there is an exemption if the agency is acquiring property because the price may increase if the details of the transaction are revealed. She noted that while they sometimes talk about a transaction in an executive session to get the process underway, after that it is a full public process. She noted that at that point the board is still considering the exchange and the vote will occur after the public process.

MEETING RECESS The Committee recessed at 3:30 p.m.

CALL TO ORDER (OCTOBER 29, 2013) Co-chairman Peterson called the meeting to order at 8:30 a.m.

14LSO-0068.W3 – MINERAL TAX-AUDIT INTEREST RATE The Committee received a copy of bill draft 14LSO-0068.W3 – Mineral tax-audit interest rate (see Appendix 14 for a copy of the bill). Mr. Craig Grenvik of the Department of Revenue explained the bill. He noted that the stricken language on page 2-line 11 is to comply with the current time frames followed by the Department. He stated that this bill would require counties to follow the department determination on interest and may put these issues into a political realm. He stated that the Department is very cognizant of its role in mineral valuation and that it was important for both the counties and the taxpayers to have clear knowledge of the tax and for the tax to be reliable.

Mr. Steve Dilsaver of the Department of Audit stated that the Department has been working with the industry on the audit process.

Mr. Scott Harnsberger, Freemont county treasurer, stated that the rate needs to be punitive because it helps with collection of the taxes. He stated that the current system is a great system and everyone knows what the value is. He noted that timely distribution is very important to the counties and it is important to be accurate. He noted that Wyoming is a self-reporting system and the producers have an obligation to report accurately and timely because if they do not it has big effects. He said that he supports the status quo and the 18% rate is punitive and helps with collection. He noted that the 18% rate is the rate for all

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 6 OF 8 taxpayers and that it should not be changed in this instance. He stated that the bill as drafted takes all flexibility away from the counties.

Mr. John McKinley, Sublette county commissioner stated that the ultimate goal should be timely and accurate reporting by the taxpayer. He said that it was important to provide an incentive for timely and accurate reporting because there is nothing more frustrating than a change at the end of an audit or through the amended return.

Mr. Larry Wolfe of Holland and Hart stated that the bill has nothing to do with incentives. He noted that the companies are incredibly compliant and there are only a handful of appeals. He said that the bill cleans up some old language, makes the counties bound by a decision of the state and changes the percentage from 18 to 12 percent. He said that all of those changes are fair to make.

Mr. Loomis stated that his organization strongly supports this bill. He said that he would disagree that companies would underreport taxes as a result of this bill and that under the proposed bill companies are much better off if they pay taxes accurately and on-time.

Ms. Cyndi Baldwin, Carbon county treasurer stated that it is a self-reporting system and companies should be reporting properly to begin with. She said that the 18% rate should encourage companies to pay what they owe.

Mr. Bruce Hinchey stated that if there are overpayments the counties do not pay an interest rate and repay over time. He stated that the 12 percent rate is still a punitive rate.

Senator Anderson moved that the Committee sponsor the bill and the motion was seconded. The Committee voted to sponsor the bill as a House Bill with a roll call vote of 9 ayes, 1 no and 4 excused. See vote form attached to the bill.

14LSO-0070.W1 – FLARING OF NATURAL GAS The Committee received a copy of bill draft 14LSO-0070.W1 – Flaring of natural gas (see Appendix 15 for a copy of the bill). Mr. Grenvik stated that it is the prerogative of the legislature to determine what is exempt. He stated that if the bill was passed, administratively it could be handled. He noted that the bill would likely generate litigation to determine the value of the flared gas. Mr. Grenvik provided a handout to the Committee of the severance taxes which could be generated from the bill (see Appendix 16 for a copy of the handout).

Ms. Shannon Anderson of the Powder River Basin Resource Council stated that there has been an increase in flaring over recent years and that flaring is approved for up to a year for fairly large quantities of gas. She said that while there may be some logistical hurdles, she believes that it is smart policy to collect the revenue and asked the Committee to forward the bill to the session.

Ms. Marguerite Herman of the Children’s Land Alliance stated that the permit to waste the gas is a separate issue and the operators should still be required to pay for the gas.

Mr. Ken Decaria of the Wyoming Education Association stated that there is a trust responsibility to maximize the revenue for funding of schools and the flared gas represents money that should have been going to those schools.

Ms. Marsha Shanor of the Equality State Policy Center stated that the State is missing out on a one time opportunity to collect revenue and that she would like the bill to move forward.

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 7 OF 8

Mr. Bruce Hinchey stated that the Oil and Gas Conservation Commission allows flaring for safety reasons and the commission has authority to allow or not allow flaring. He stated that he had concerns with this bill and that new oil wells may not have the capacity to take the gas and there are some that will not have access to a facility to process the gas. He said that the bill would put a value on a product which is not sold or processed which could be a problem. He stated the bill, if passed, may create a conflict with article 15, section 3 and article 15, section 11 of the Wyoming Constitution. He noted that natural gas is vented from trona mines and that it would be too costly too process. He stated that if the bill was passed it could result in years of litigation over not very much gas.

After additional discussion Senator Case moved that the Committee sponsor the bill and the motion was seconded.

Co-chair Madden provided a handout on the tax that the gas might represent on a hypothetical oil well (see Appendix 17 for a copy of the handout). He noted that the taxation of flared gas would not be an onerous burden and would not discourage the production of oil. Co-chair Madden also provided a handout to the Committee of a draft amendment to include gas that is combusted (see Appendix 18 for a copy of the amendment).

Mr. Grant Black of the Wyoming Oil and Gas Conservation Commission stated that oil wells are allowed to flare for 15 days on completion of well. Mr. Black provided a map to the Committee of wells approved to flare (see Appendix 19 for a copy of the map). He stated that the intent of the 15 day period was to allow testing for production. He noted that the Commission is charged with the prevention of waste and evaluate flaring permits on a case by case basis. In response to a question he stated that it was possible to use the gas to produce electricity but there is not really a market absent use on site. He noted that people are also looking at capturing the gas to turn it into compressed natural gas, but there are a lot of factors to consider.

Representative Blikre moved that the bill be amended on page 2-line 5 by deleting "fifteen (15) days" and inserting "one hundred eighty (180) days". The motion was seconded and passed by voice vote.

Co-chair Madden moved that the bill be amended to add the word "combusted" in accordance with the draft amendment (see Appendix 18). The motion was seconded and passed by voice vote.

After additional discussion, the bill failed with a roll call vote of 2 ayes, 8 noes and 4 excused.

MEETING ADJOURNMENT There being no further business, Co-Chairman Peterson adjourned the meeting at 11:30 a.m.

Respectfully submitted,

Senator Peterson, Co-Chairman Representative Madden, Co-Chairman

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 8 OF 8

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Appendix Agenda Item Appendix Description Appendix Provider

1 Committee Sign-In Sheet Lists meeting attendees Legislative Service Office

2 Committee Meeting Provides an outline of the topics the Legislative Service Office Agenda Committee planned to address at meeting

3 14LSO-0155.W1 Property tax exemption - charity Legislative Service Office

4 14LSO-0158.W2 County board of equalization - 2 Legislative Service Office

5 14LSO-0158.W2 Amendment Legislative Service Office

6 14LSO-0069.W1 Taxation of multi-county projects Legislative Service Office

7 14LSO-0069.W1 Amendment Legislative Service Office

8 14LSO-0175.W2 Sales and use tax consultation Legislative Service Office

9 14LSO-0175.W2 Amendment Legislative Service Office

10 Department of Revenue Testimony on drafts 69.W1 and 175.W2 Department of Revenue

11 Proposed amendment Amendment for 175.W2 Jody Levin

12 CREG report CREG report Legislative Service Office

13 Office of State Lands State lands presentation Office of State Lands

14 14LSO-0068.W3 Mineral tax-audit interest rate Legislative Service Office

15 14LSO-0070.W1 Flaring of natural gas Legislative Service Office

16 Severance tax analysis Severance tax for flared gas Department of Revenue

17 Hypothetical well Hypothetical well tax analysis Co-chair Madden

18 14LSO-0070.W1 Amendment Legislative Service Office

19 Map of flare permits Map of flare permits Oil and Gas Conservation Commission

JOINT REVENUE COMMITTEE Summary of Proceedings

WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov