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Wyoming Becomes an Alternative Energy Producer

“I believe in a free lunch being free like I believe in a perpetual motion machine.”
Sen Charlie Scott (R-Natrona) February 18, 2015, during the Wyoming Senate debate on HB 53

Minerals prices are low, tax revenue is on the decline, and Governor Mead and many Wyoming legislators are scrambling to appear to be doing something about it. One something that came out of the 2015 Legislative Session was the Minerals to Value Added Products Program. Yes, just what we need, another government program, but this one proposes to make taxpayers a partner in alternative energy projects private company are fleeing from as fast as they can. But if people using their own money are unwilling to engage in such risky ventures, politicians are wrong to take Wyoming down this path.

The Minerals to Value Added Products program is one of those boondoggles that allows politicians to stand up and say they are diversifying the economy, creating jobs, and—let’s never forget—increasing government revenue. Under the program, the state would provide a minerals supply guarantee to a minerals-to-value-added product facility by purchasing minerals, paying for minerals processing in the facility and then selling the product in the market. Facilities eligible would be those such as DKRW’s coal-to-liquids, or Two Elk’s proposed gas-to liquids, facilities. No single contract would be greater than $50 million and the amount processed in the plant would be no greater than 20 percent of the plant’s capacity.

Put plainly, Wyoming taxpayers would purchase minerals, use a privately owned plant for minerals processing and then sell the end product to someone. This process is known as tolling.

Corporate welfare comes in many forms, but I must admit getting into the minerals buying and selling business is more ambitious than just throwing money at companies and hoping it sticks. But why is the state using this form of corporate welfare now?

During the House floor debate January 28, 2015, Rep. Lloyd Larsen, (R-Fremont) said the thinking behind this bill was: “when you bring on an industry like this into the state, one of the things they are really trying to do is capture financing … one question they are asked [by financing companies] is do you have customers, do you have a supply of feedstock for this?” By committing to 20 percent of the company’s inputs, this “goes a long way for them to get the financing necessary to make the product come to fruition.”

But since when is it the role of government to provide supply guarantees to private businesses?

This question was not lost on some legislators. Tyler Lindholm (R-Crook/Weston) asked the obvious question: “What is the role of government?”

Norine Kasperik (R-Campbell) who sits on the Joint Minerals, Business & Economic Development Committee that sponsored the bill, said its proper role is to “make sure the state meets the needs of our people.”

Wow! Which people? Everyone? Which needs? All? Why stop at buying minerals for value-added minerals plants? Why not buy food? And why stop at guaranteeing the supplies of some businesses to attract them? Why not guarantee the supply of shoes at a new Macy’s or of organic vegetables at a new Whole Foods here in town?

In a separate debate on the senate side, Sen. Cale Case (R-Lander) said it best when he pointed out that major oil and gas companies are sitting on massive reserves of natural gas and would love to be able to convert all that cheap gas into higher valued diesel. He said: “Don’t you think they would be doing it if it were financially feasible? You would do it in a heartbeat if it made sense.”

Major oil and gas companies are not doing it – what does that tell us?

It tells us no one is having any success with coal or gas alchemy. In fact, both Sasoil, a large South African Energy company, and Royal Dutch Shell recently cancelled plans to build gas-to-liquids facilities.

It is not for state legislators to force Wyoming taxpayers to go on risky adventures with unproven projects people are unwilling to put their own money towards. If legislators were interested in doing more than just appearing to do something, they would get out of the way by reducing regulation and lowering taxes so people are freed to make real investment decisions.

Leadership or Fiscal Panic
At $50 Oil, What Happens to the State Budget?

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Thursday, 18 January 2018

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