Legislature considers borrowing against tax
Lawmakers hope money would help with impact of oil, gas development
September 14, 2007
Denver — Borrowing against severance tax and federal mineral lease revenue to pay for the burgeoning impact of oil and gas development, particularly in Garfield, Rio Blanco and Moffat counties, was among several issues considered Thursday by a special committee of the Colorado Legislature.
“I want to see northwest Colorado get $200 million to $300 million in the next two years,” said Sen. Chris Romer, D-Denver, an investment banker who is a strong proponent of bonding for infrastructure. “Turning $500,000 impact grants into $5 million doesn’t even being to address the issue.”
Sen. Jack Taylor, R-Steamboat Springs, only reluctantly endorsed a motion to have the Legislative Legal Services draft a bonding bill as a starting point for discussion.
Noting previous boom and bust cycles of energy development in western Colorado, Taylor said he was concerned about who would be liable to pay off the bonds if the energy companies pull out again.
“Who’s going to guarantee the bonds?” Taylor asked. “Bonding may be a way to get more money up front, but I’m not comfortable with what happens with a real downturn like we had in the 80s.” Taylor said.
Taylor and Rep. Al White, R-Winter Park, whose respective Senate and House districts include Moffat County, both said they asked to sit on the special interim committee that is considering reforming the way severance tax dollars are allocated to communities directly impacted by energy development.
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“I wanted on this committee to play defense and make sure than any reallocation that takes place doesn’t hurt those communities that are already receiving dollars from minerals severance taxes,” White said. “A lot of Front Range people see these dollars as being a golden goose.”
White said the communities surrounding the Piceance Basin are having the roughest time coping with the impact of energy development.
“The highways are one of the most visible pieces of the impact, but there are other less tangible socio-economic impacts,” White said. “It’s easy to drive up and down and see the truck traffic, but it’s less easy to see the impact of overflowing jails and overworked law enforcement agencies and schools that can’t get teachers because of the cost of housing.”
Taylor said heavily impacted counties already are being shortchanged in their share of severance tax revenue. He produced a chart showing mineral extraction in Garfield County generating $156 million in state and federal severance taxes during a 7-year period, but getting less than $9 million back during the same time frame.
Taylor said Rio Blanco County Road 5 is the “only safe road in and out of the Piceance Basin” used by 2,500 energy company workers every day. He said all 43 miles of the road need rebuilding at an estimated cost of $2 million per mile.
“I’m here to make sure these impacts are getting covered,” Taylor said. “There’s money coming in and I think there is a strong movement to move some of that money away from the impacted areas. And I will fight that.”
State severance tax revenue, which totaled $132 million in 2004 and is growing, is split 50-50 between Department of Local Affairs, which distributes the impact funds to local governments, and the Department of Natural Resources. The DNR portion is further split between a perpetual base account and an operations account that pays for water projects and activities of the Colorado Oil and Gas Conservation Commission.
The interim committee is considering changes to the size and composition of the working group that advises DOLA on the allocation of impact funds.
The group also may recommend changes in the formula for the way “local impact” is determined. Currently, the distribution is based on the type of industry (oil & gas, coal or metals) and the number of employees in each industry. A recent state audit determined that the current formula is weighted against the more heavily impacted counties.
The severance tax committee will begin formalizing its recommendations to the full legislature at its Oct. 10 meeting.
Meg Collins, the new president of the Colorado Oil and Gas Association, said the industry is watching the “important” work of the committee.
“We want to see what they come up with and make sure we see how local communities can be better served by severance tax dollars,” Collins said. “According to the folks that live in the impacted counties, they aren’t getting sufficient severance tax dollars to mitigate those impacts.”