Wyoming’s latest legislative session delivered some major victories for fossil fuel producers and supporters of carbon dioxide-enhanced oil recovery. Lawmakers passed several measures aimed at boosting coal production, incentivizing oil recovery, and encouraging carbon dioxide utilization—all with the goal of keeping Wyoming’s energy sector competitive.
One of the most significant bills, House Bill 75, reduces the severance tax rate on surface-mined coal from 6.5% to 6%. Supporters of the measure argue that the tax cut will help coal companies navigate declining markets and reinvest in mining operations. Opponents, however, point out that Wyoming municipalities are already feeling the squeeze from a 25% property tax reduction signed into law this month, and this new tax cut could further deplete state funds meant for schools, roads, and public services.
Another key measure, Senate File 17, establishes a $10 million fund to support carbon dioxide-enhanced oil recovery—a process that involves injecting CO₂ underground to boost oil and gas production. Companies that qualify for the federal 45Q tax credit can apply for up to $10 per metric ton of CO₂ used in the process, paid from the Wyoming fund.
The Push for Enhanced Oil Recovery and CO₂ Utilization
Wyoming’s oil and gas industry sees carbon dioxide as a crucial resource for enhanced oil recovery, but access to a steady supply of CO₂ remains a major challenge. Lawmakers debated adding a $10 million appropriation to support the development of a new coal power plant that would capture CO₂ emissions for use in oil recovery. While the proposal was ultimately withdrawn, the Wyoming Energy Authority stepped in and agreed to dedicate $10 million toward the effort through its Energy Matching Funds program.
Industry leaders are optimistic about the push to increase Wyoming’s commercial CO₂ production. Green River Republican Scott Heiner highlighted the issue during the session, stating, “The CO₂ pipeline is fully at capacity right now. To expand enhanced oil recovery, we need more CO₂.” However, the Enhanced Oil Recovery Institute later clarified that Wyoming currently has an adequate CO₂ supply, though there is potential for future demand growth as more oil fields become candidates for carbon-enhanced recovery.
Senate File 18, another proposed measure, sought to cut severance taxes on oil from 6% to 3% when tied to carbon capture and storage efforts. While this bill didn’t make it through the Senate, it sparked debate over whether tax breaks are the best way to promote innovation and investment in fossil fuel technologies.
Do Tax Breaks and Incentives Actually Work?
The coal severance tax cut is expected to cost Wyoming $10 million in lost state revenue in 2026, with continued declines likely if coal production keeps shrinking. A similar tax reduction in 2022 was meant to help coal companies reinvest, but the industry has continued to lose jobs and see production declines. Since 2021, Wyoming’s coal output has dropped by 20%, and 632 coal jobs have been lost, raising questions about whether these tax breaks are actually helping.
Supporters argue that without these cuts, Wyoming’s coal downturn could be even worse. Critics, however, cite a 2000 study on mineral tax incentives that concluded state tax reductions have little influence on production and employment.
Sheridan-based landowner advocate Bob LeResche was blunt about his opposition, saying, “It doesn’t increase production, it doesn’t do a damn thing. It’s just a redistribution of wealth from schools and roads to coal companies.”
Wyoming’s Future in Carbon Capture and Fossil Fuels
While some view tax breaks as an ineffective strategy, others believe Wyoming’s investment in carbon capture and enhanced oil recovery could pay off. ExxonMobil, which operates Wyoming’s Shute Creek natural gas processing facility, already benefits from federal and state CO₂ incentives, but it sources its CO₂ from underground wells rather than captured emissions.
A 2024 report from University of Wyoming energy economist Timothy Considine suggests that if Wyoming can successfully expand commercial CO₂ production, it could see a strong return on investment. According to the study, for every dollar spent on incentives, Wyoming could see an increase of $2.40 in severance and ad valorem taxes.
With lawmakers pushing for more commercial CO₂ suppliers and stronger fossil fuel incentives, Wyoming is banking on carbon-enhanced oil recovery and tax cuts to sustain its energy sector. Whether these measures will truly revive the industry—or just delay its decline—remains to be seen.
