Denver Coal industry representatives claim the Colorado Department of Revenue's plan to reverse a 14-year-old freeze on coal severance taxes is an unconstitutional violation of the Taxpayer's Bill of Rights.
Keith Haley, general manager of the Colowyo Mine in Moffat County, was among the industry officials urging DOR deputy director Tim Weber on Tuesday to withdraw a proposed rulemaking that could increase coal severances taxes by up to 33 percent.
"Colowyo has the largest surface mine in Colorado and has been in continuous operation since 1977," Haley said. "Any increase in the severance tax will negatively impact Colowyo's ability to market and sell its coal."
Haley said Colowyo's mine produced about 6 million of the 36-million tons of coal mined in Colorado last year.
Armed with a 10-page opinion from Attorney General John Suthers, DOR Director Roxy Huber is seeking to reverse a 1993 regulation that applied the provisions of TABOR to severance taxes. Suthers said then-DOR director Renny Fagan did not have the discretionary authority to freeze the tax.
"The applicable rate is fixed by statute with a mandatory directive to adjust the rate according to changes in the index of producers' prices," Suthers wrote. He also concluded that "voter approval is not required prior to the department calculating and assessing the coal severance tax as required by law."
Haley, Colorado Mining Association President Stuart Sanderson and CMA attorney Paul Seby all disagreed with the attorney general's opinion and said it should not be the deciding factor in the department's decision.
They argued TABOR supersedes any conflicting statutes and requires voter approval for any tax policy change that results in additional revenue to the state.
"How can it really be argued that the decision to change policy announced in 1993 is not a tax policy change?" Sanderson asked. "How can increasing the tax rate from 54 to 73 cents not be a tax increase that triggers the voter approval requirements of TABOR."
Seby also claimed the DOR failed to follow the usual rulemaking procedures.
Assistant Attorney General Carolyn Lievers attended Tuesday's hearing but asked no questions of the mining officials.
Sanderson said he was disappointed at Lievers' silence.
"Unfortunately, the Attorney General has chosen not to engage in a dialogue here today over some legal arguments and questions," he said. "There are substantial questions about the opinion's validity."
Sanderson said Colorado's 10 coal mines, including the New Horizon and Golden Wonder Mines of southwestern Colorado, would be forced to seek a pass-through increase to its customers, most notably Excel Energy, which in turn could pass them on to consumers.
"Coal accounts for 26 percent of Colorado's electricity needs and is the most affordable source of electricity generation in Colorado," he said.
District 8 Sen. Jack Taylor, R-Steamboat Springs, did not attend Tuesday's hearing but sent a 2-page letter to the department protesting the rule change. His northwestern Colorado district also includes the Trapper mine south of Craig and the Foidel Creek underground mine in Routt County.
"Despite the benefits of Colorado's cleaner coal, a significant increase in the cost of Colorado coal will undoubtedly result in a decrease in the amount of Colorado coal purchased," Taylor wrote. It "will adversely impact the coal industry and threaten the revenue stream that supports public education and government functions in Colorado."
Weber said he would keep the comment period open until Friday, then issue his decision possibly by the end of next week.
Weber said it then would be up to Huber to decide whether to increase the tax rate under the new rules or apply it retroactively.
"Whether or not the department will catch up in rates and in time is a decision of the executive director and whether she feels the department has sufficient resources to deal with a retroactive application," Weber said. "The implications of that is mind boggling."
Sanderson decline to speculate on the industry's next move should the rules change and the freeze be lifted.
"This is an issue we don't take on lightly," he said. "We strongly believe in our case but I'm not holding my breath that the rulemaking will be withdrawn."