Interior Dept. cuts mineral payments to 35 states

Published 9:06 am Thursday, March 28, 2013

CHEYENNE, Wyo. — The U.S. Department of Interior is cutting federal mineral payments to 35 states by about $110 million this fiscal year as part of the automatic federal spending cuts that started this month.

Wyoming Gov. Matt Mead announced this week that his state faces the biggest cut — at least $53 million over the next five months. Wyoming is the nation’s leading coal-producing state and last year received nearly $1 billion in federal mineral payments.

The federal government paid a total of $2.1 billion last year to the states, representing their share of revenue from energy and mineral production that occurred on federal land within the states, as well as offshore.

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The federal money helps Wyoming fund state government operations. Income from energy production allows the state to avoid having a personal or corporate income tax.

Mead said he plans to consult with other states affected by the cuts as well as with members of Wyoming’s congressional delegation to try to restore the funding.

Even if the cuts remain in place, they’re unlikely to have much effect on Wyoming state government operations. The state is on track to finish the current fiscal year with roughly $1.6 billion in its so-called rainy day account and has billions more in permanent savings.

New Mexico will take the next-biggest hit, a loss of $26 million. The reduction for New Mexico, a leading natural gas and oil producer, represents about 0.5 percent of the total revenue the state expects to collect in its main budget account in the current budget year.

Democratic Sen. John Arthur Smith, chairman of the New Mexico State Senate committee that handles the budget, said he was concerned that the $26 million is the “tip of the iceberg” of potentially larger federal cutbacks to states.

“As far as being able to ride the storm out right now in the short-term, obviously we can do that with the reserves that we are forecasting,” Smith said.

New Mexico should have a financial safety net of about $570 million at the end of this budget year, with those cash reserves roughly equal to 10 percent of the state’s spending.

Other states hit hardest include Colorado, which is losing $8.4 million, and California, which will get $5.5 million less. The states’ losses range all the way down to $7 for North Carolina.

Pat Etchart, spokesman for the Interior Department’s Office of Natural Resources Revenue in Denver, said the federal budget cuts known as “sequestration” require the department to cut payments to the states.

“Cumulatively, approximately $110 million — or 5 percent of FY 2013 estimated disbursements — will be withheld from several states and counties where energy production occurs on federal lands during the remainder of the current fiscal year,” Etchart said.

He said counties where geothermal energy production occurs also will see cuts, he said.

Etchart said his office recognizes the cuts may impose hardships on states but it has no choice under the budget-reduction law.

Mead announced Tuesday that he received no advance warning from the federal agency of the cuts.

“As far as communications go, this method of passing along significant information that greatly impacts Wyoming gets a grade of F-minus or worse. It is not acceptable,” Mead said. He said he has asked the state attorney general’s office for advice on the Wyoming’s options.