CHEYENNE, Wyo. (AP) — Wyoming remains on solid fiscal footing for now but the effect of low oil and natural gas prices on government revenue is just beginning to be felt, cautions a report by Wyoming's state revenue forecasters.
The severity of that effect depends on whether the downturn persists long enough to ripple through the economy, said Don Richards, co-chairman of the state Consensus Revenue Estimating Group.
"In the long and intermediate term, much will depend on the prices of Wyoming's commodities," Richards said Thursday.
Oil prices are recovering somewhat from a sharp drop last winter but at around $58 a barrel they are still down 40 percent from last summer. Natural gas prices, at $2.40 per thousand cubic feet at western Wyoming's Opal Hub, are down about 45 percent from a year ago.
Since 2010, soft natural gas prices have slowed Wyoming gas production by more than a third. Whether weak oil prices linger long enough to similarly affect oil production remains to be seen.
Oil production remains at 20-year highs following a boom in deep drilling and the use of hydraulic fracturing in eastern Wyoming. But over just the past six months, falling oil prices have pushed Wyoming's rig count — the number of rigs actively drilling for oil and gas in the state — to 16-year lows.
In January, low oil and gas prices prompted CREG to reduce its two-year revenue forecast by $217 million. An update released this week shows revenue tracking closely with that revision.
Should oil production decline, state revenue could decline further. Wyoming's revenue from severance taxes and federal mineral royalties are based on production volumes as well as prices.
"Today, all of the negative impacts that we have experienced are on the price side of that formula. It is certainly possible — although we haven't seen it yet — it is possible that our production could be adversely impacted," Richards said.
Sales and use taxes in Wyoming remain strong but eventually could also prove vulnerable.
"If history is an indication, there is the potential for a lagged impact on sales and use tax, as well, through a reduction of payroll for oil and gas employees, as well as a reduction in purchases by extractive industries," Richards said.
Eventually even property tax revenue could decline, he said, around the time state officials expect tens of millions of dollars in revenue from new coal leasing to begin drying up in the next biennium.