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Towns want more oil and gas money

Dennis Webb
Garfield County Correspondent

GARFIELD COUNTY ” Garfield County and area communities will receive millions of dollars in new funds to pay for the impacts of energy development, the state announced this week. But local officials say that’s still far less than they need to cover those impacts.

The state Department of Local Affairs reports that the county got $1.43 million in direct severance tax distributions and about $619,000 more in direct federal mineral lease distributions. Area communities also received allocations, which are calculated based on the residencies of workers in the oil and gas industry and coal and metal mining. Rifle received the most money of any local community, with its amounts totaling about $566,000.

Statewide, about $11.4 million in severance tax revenues and $4.7 million in federal mineral lease revenues was handed out.



Just how the severance tax and federal mineral lease revenues should be distributed has been a controversial issue. A special legislative committee is studying Colorado’s severance tax structure and distribution formula. In the short term, a bill passed this year is scheduled to double Local Affairs’ direct distribution to impacted communities to 30 percent.

Garfield County Commissioner Larry McCown believes the amount of federal mineral lease revenues coming back to the area is way too low, considering that the county generated more than $125 million in mineral lease revenues last year.



“That’s not a very good return on our money,” he said.

Rifle Mayor Keith Lambert said the disbursements to his city are important.

“But they’re certainly not enough revenue to meet the needs that we’re experiencing,” he said.



They’re not enough to even pay for roundabouts the city has been trying to build at its main Interstate 70 exit, he said. That project continues to be daunted by fast-rising construction costs.

The energy industry boom has helped Rifle enjoy record tax revenues, but its needs are growing at twice the rate of those revenues, Lambert said. It has doubled sewer rates to help cover the $23 million cost of a wastewater treatment plant, and faces a total of about $68 million in total infrastructure costs over the next five years.

Lambert and Parachute Mayor Roy McClung testified before the state severance tax committee this week. Lambert said he’s worried that the committee may look to severance taxes for pressing state needs for education and transportation funding.

But he said the tax was created to help communities impacted by the industries generating the tax.

Severance tax distribution rates per oil and gas employee are more than three times higher than those for coal and metal mining industry workers. Statewide, the distribution for about 6,600 oil and gas workers amounted to $1,555 per employee.

McCown worries about talk that the committee may consider equalizing the payment per employee, regardless of the industry. He said the severance tax on coal is lower than on oil and gas, and the value of coal production is lower. He said changing the payment formula would hurt Garfield County. Garfield is the leading county in the state in drilling activity.

Aron Diaz, executive director of Associated Governments of Northwest Colorado, said one welcome change the committee is considering is to take into account not just employment but well permits and production as factors in distributing severance tax revenues. That would make things fairer in places such as Rio Blanco County where there is lots of drilling activity but workers commute each day from elsewhere.

Diaz said the state already has worked to make distributions fairer over the years by means such as tracking employees’ temporary work addresses rather than their permanent residences, and counting contract workers who may divide time between multiple companies.

Still, he said, “I think everybody understands it’s not the most perfect system. That’s why we have the interim committee looking at the issue right now.”


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