Group urges higher taxes for oil, gas firms
State gave industry $1.3 billion in tax breaks over past five years, according to new study
DENVER - Colorado’s oil and gas industry needs to pay more to mitigate the impacts of drilling in the state after receiving $1.3 billion in tax breaks over the past five years, according to a study from a renewable energy group.
The study, released Thursday, comes as an interim legislative committee is nearing recommendations on whether revenues from severance taxes — paid by companies extracting minerals from the ground — need to be distributed differently.
Randy Udall, the author of the report, said legislators need to go beyond the question of who is getting the money and consider ways that the state can reap more benefits from a booming industry. It could do this by eliminating a pair of tax breaks that have benefited oil and gas companies, or it could even consider raising the severance tax rate to the level of neighboring states such as New Mexico and Wyoming, he said in a teleconference.
“If the Legislature simply looks at their civic responsibilities and what is reasonable and fair and equitable, I don’t think these changes are that difficult to make,” said Udall, director of the nonprofit Community Office for Resource Efficiency.
Sen. John Morse, D-Colorado Springs, said he believes, however, that the Legislature should not charge headlong into making changes before it takes a look at the state’s total tax picture. While gas and oil companies may need to pay more, other industries and tax breaks need to be examined as well, he said.
“We need to look at this in the broad spectrum of who is not paying their taxes. Oil and gas companies are clearly making great profits right now, but I’m not sure that’s a reason to target them.”
Because of a surge in oil and gas drilling, the state has received increasing severance tax revenues over the past five years, including a record $132 million in 2006, Udall said.
The money goes to a variety of sources, including a state trust fund, the Department of Natural Resources and the counties and towns affected by drilling.
But Udall, the brother of Democratic Rep. Mark Udall, said the state could have collected $1.3 billion more over that time if it had eliminated two tax breaks.
One, known as the ad valorem deduction, allows 87.5 percent of county property taxes to be deducted from their severance tax bill.
The second allows owners of wells that produce less than 15 barrels of oil or 90,000 cubic feet of natural gas per day to not pay any severance tax on those wells. As a result, owners of 75 percent of the wells in the state pay no severance tax at all, Udall said.
While Colorado’s 5 percent severance tax rate is not significantly lower than New Mexico or Wyoming, it is making far less from it because of all the breaks. While Wyoming reaps more than $1,000 per state resident from severance taxes and New Mexico more than $400 per resident, Colorado gets just about $30 per resident, Udall said.
Oil and gas companies that have faced such criticism before have responded that Colorado’s lower tax rates encourage drillers to set up wells here. But with the industry expected to extract more than $400 billion of mineral wealth from the Colorado ground over the next decade, Udall argued that companies will not pack up and leave if forced to pay as much as in neighboring states.
“It’s high time that Colorado began getting a fair return on its mineral resources,” said Elise Jones, director of the Colorado Environmental Coalition. “It’s rare that Coloradans say, ‘I wish we were more like Wyoming,’ but this is one way in which they should.”
A message left for Colorado Oil and Gas Association President Meg Collins was not returned Tuesday.
CONTACT THE WRITER: (303) 837-0613 or ed.sealover@gazette.com
