Taxes proposed for Colo. energy drillers
February 14, 2008
DENVER, Colorado ” Environmentalists introduced four ballot proposals Thursday to increase the taxes paid by the oil and gas industry as they seek to build support for a statewide campaign.
The move comes as state lawmakers and the governor are still considering whether to ask voters to increase the state’s severance tax this year.
The coalition, which includes Trout Unlimited, Environmental Defense, The Wilderness Society and others, wants to use the estimated $200 to $300 million the proposed hikes could generate to boost renewable energy, protect wildlife habitat and help communities impacted by the boom. Joe Neuhof, West Slope field director for the Colorado Environmental Coalition, said some coalition members have been involved in the Capitol discussions about whether to raise Colorado’s tax ” the second-lowest in the West ” but wanted to put forward their priorities for how the money should be spent.
“This is a starting point,” Neuhof said. “This is where we’re at right now and we want to build a coalition and work with other interests in shaping it.”
Evan Dreyer, a spokesman for Gov. Bill Ritter, said lawmakers have been talking both about whether to change the tax ” including getting rid of a deduction for property tax paid by the industry ” and which of the state’s pressing needs, such as health care or higher education, would get money. Dreyer said communities seeing an increase in oil and gas production also need to be considered.
Earlier this week, higher education chief David Skaggs said this may not be the best year to ask voters for an increase partly because competitive races for the White House and U.S. Senate may make it too expensive to advertise a ballot proposal.
Meanwhile, Sen. Josh Penry, R-Fruita, has threatened to launch a counterproposal if anyone presses ahead with an oil and gas tax hike. He said it’s not the right time to raise severance taxes because state regulators are drafting stricter rules for the industry which were backed by the Ritter administration.
The environmental coalition would have to collect signatures to get a proposal on the ballot this fall, while lawmakers could simply vote to refer a measure to voters.
Stan Dempsey of the Colorado Petroleum Association said it’s too early to tell which proposal will come together this year ” whether from lawmakers or citizens ” but he said the large energy companies and independent firms in his group oppose raising the tax rate or getting rid of the property tax deduction.
“This is the first proposal we’ve seen,” Dempsey said of the ballot measures.
The four ballot proposals include different combinations of getting rid of the current tax exemption for small wells, adding an extra 3 percent tax for all oil and gas wells and setting a new 10 percent tax rate for wells that produce more than $300,000 a year. Some would also bar energy companies from deducting their property tax in calculating the severance tax they owe.
According to legislative economists, Colorado’s severance tax is the lowest after Utah in the West. Factoring in other taxes, like income taxes paid by companies in those states, Wyoming has the highest effective tax rate at 11.2 percent, compared to 5.7 percent in Colorado.
Right now, severance tax revenues are divided between the Department of Natural Resources and the Department of Local Affairs, which gives out some grants to affected cities and counties as well as others not impacted by oil and gas.