Star-Tribune Editorial Board

Talk about mixed emotions.

Wyoming is delighted that the price of natural gas is soaring, because so is the state's severance tax revenue. Consider that natural gas produced in Wyoming was selling for less than $1 per thousand cubic feet (mcf) last September. During the first week of July, the average daily price was $9.28 per mcf - nearly three times higher than state economists had forecast.

Yet Wyoming state government is also adding up all of the lost tax revenue due to the fact that natural gas is selling for $3 to $4 per mcf higher across the rest of the nation.

The price differential regularly plagues Wyoming because construction of new pipelines to carry natural gas out of state hasn't kept up with increasing production. The differential cost Wyoming $470 million in 2007 alone - money that's shared with local governments.

While Wyoming is certainly doing well economically thanks to its improved energy markets, think about how much better off the state would be if it had all of that unrealized revenue at its disposal.

"When you look at the differential, it's just a shame," says Mark Doelger, chairman of the Wyoming Pipeline Authority. "Selling your product below market is an economic waste of a resource."

It certainly is. And even though several pipeline expansions are in the works to increase export capacity, the next one probably won't be completed until 2011 or 2012. Doelger says the state is likely to see a severe price depression next year and in 2010.

Some officials, including Gov. Dave Freudenthal, believe market forces should determine how production and transmission issues are resolved. But the market is unlikely to eliminate Wyoming's natural gas underpricing without the involvement of the state.

As John Campbell of Double Eagle Petroleum in Casper told Star-Tribune energy reporter Dustin Bleizeffer, "The state has no one to blame but itself. Long ago they should have provided financing incentives to get more pipeline capacity built."

In 2006, legislators denied a request by the Wyoming Infrastructure Authority to allow it to purchase or rent space on pipelines so more could be built at a faster rate. That was a mistake.

The Pipeline Authority, meanwhile, has $3 billion in bonding authority but is hampered by its lack of tax-exempt status for bonding. The WPA can't accomplish all of the work it was meant to do.

The Pipeline Authority is preparing a list of possible measures for legislators, who should make closing the price differential a top priority. The state has a lot riding on the ability of Wyoming's natural gas to receive a price as close to the national average as possible. The fact that another major price differential is only about a year away should convince the Legislature to expedite any solutions.

Wyoming needs to do everything it can to speed up construction of natural gas pipelines.

What do you think?

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