Reality Check: oil, gas, and taxes

Homes in Vista Ridge, with Longs Peak in the background.

Homes in Vista Ridge, with Longs Peak in the background.

There was a lot of media flurry surrounding the Colorado Supreme Court decision to overturn the Longmont and Fort Collins fracking bans.  Still another Supreme Court decision in April 2016 flew largely under the radar — even for our state legislators.

In early May, state lawmakers were surprised that they needed to address a budget crisis after a Colorado Supreme Court decision determined that the State of Colorado owes upwards of $100 million in tax refunds to oil and gas companies. At issue is a deduction from the severance tax that oil and gas companies pay when they extract non-renewable natural resources from the ground. Severance taxes that the state collects are divided 50:50 between the Department of Natural Resources and the counties that are impacted by oil and gas development.

Yet here is the disturbing reality of oil and gas taxes in Colorado as reported in the Denver Post:

  • Colorado has one of the lowest tax rates of the western states
  • Companies can already deduct property taxes from their calculated severance tax. So what starts out as a 3-5% tax (depending upon the value of oil and gas at the time) is reduced to approximately a 1.3% tax. And now, they are allowed yet another deduction because of the way the law was written and subsequently interpreted by the state Supreme Court.

So you may be thinking, “if state lawmakers were unaware that oil and gas companies could take an additional deduction against the severance tax, why don’t they just re-write the law?” And yes, that would be a logical way to clean up the budget mess for next year. However, a bill that would have taken away the severance tax deduction from this point forward died in the House of Representatives due to lack of support.

Let me be very clear: the oil and gas severance tax is supposed to be a means for communities impacted by oil and gas activity to receive additional financial benefit beyond collection of property taxes. We just learned that oil and gas companies will now be paying even less severance tax to the state, meaning that our towns and cities will receive less money. And rather than address this legal loophole, our state legislators chose to do nothing, and ultimately we the taxpayers will suffer the consequences.

So I ask you, do our state lawmakers appear to be serving the citizens of Colorado, or are they serving the oil and gas industry?

The influence of special interests on our lawmakers at all levels of government has become a bit of a catch phrase because it is so pervasive.  It warps our democracy.  It is the very reason that our state constitution allows for citizens to make amendments through ballot initiatives like the Colorado Community Rights Amendment.  Government corruption and  special interest influence is nothing new.  Our predecessors had the foresight to preserve the rights of individual citizens to bypass our state lawmakers in order to put decision-making back into the hands of the people.  Don’t be fooled by the pro-industry push to “protect the integrity of the constitution” and make it more difficult to amend.  This so-called “Raise the Bar” ballot initiative weakens our individual rights and makes us more dependent upon state lawmakers.  Good for them — bad for you and me.

Both our state government and the oil and gas industry would have us believe that oil and gas development is so vital to Colorado’s economic well-being, that we should bend over backwards to accommodate its needs.  Allowing drilling activities within our towns (near our homes and schools) benefits oil and gas companies because we already have the roads and infrastructure in place to support the transport of the materials they extract.  But if you think this activity doesn’t have the potential to negatively impact your property values — think again.  I have received several inquiries through this blog site from people who wonder whether or not they should buy a home in Erie since they’ve heard about our issues with fracking.  Honestly, I’m not sure what to tell them.   Furthermore,  being so beholden to a single source of jobs and income puts our economic well-being at tremendous risk when there are massive market swings in the value of oil and gas.   Check out the projection of job losses for Weld County this year: Denver Post: “Northern colorado job rift opens with weld bleeding badly.  And if you want to see a real-life “worst case scenario”, just look at Venezuela.  Venezuela’s critical error was in failing to diversify it’s sources of income, relying instead almost entirely on oil production.  Now the country faces devastating economic collapse because of the sustained fall in oil prices.  Meanwhile, the market for renewable energy sources is surging, and job prospects are following suit.  We have other industry options that will help keep Colorado a thriving and viable state; we just need to stay open to new possibilities and stop investing so heavily in oil and gas.

It’s not too late to sign the petition to get the Colorado Community Rights Amendment on the ballot in November.  Please get out there and make a difference.  Our future depends upon it.

 

 

 

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One thought on “Reality Check: oil, gas, and taxes

  1. I checked out a lot of posts on this blog. You are courageous, a truth-teller, and you have my sympathy.

    I took a $30k loss / hit (not including commissions paid) just so I could get the hell out of Vista Ridge. Bought in 2007 and I LOST money, didn’t gain one dime of equity in 8 years! Due to fracking, subsidence/expansive soils and the resulting lawsuits, and last but not least, “garbage mountain” – I consider my foolish move to Vista Ridge as one of if not THE greatest mistake of my entire life. Yes the view was great, but certainly not worth the high price I paid for it.

    I won’t even go into the corrupt in-the-bag politics I saw there. In addition, my Vista Ridge / Erie property taxes were 2-3 times higher than communities that are much nicer, more established with much better infrastructure, business and more amenities, no dumps and no fracking.

    I admire your fighting spirit, but in my opinion you are tilting at windmills – taking on powerful people who play dirty and will outspend you by 10 times.

    Fight on, you have my best wishes, but I am a “fighter” too, with resources & a few connections, but I soon saw that I was fighting a lost cause, … and worse, big oil interests (not to mention that ugly mountainous dump, which I read will be accepting some really tasty liquid waste soon) – I cut my losses and got the hell out. God help anyone foolish enough (like I was) to buy into Vista Ridge / Erie.

    If I sound bitter, it’s because I AM – I am a retired engineer, and due to my calculations, thanks to my naive move into Vista Ridge, I have about $100-200k less to live on until I die as opposed to what I would very likely have if I had just stayed put.

    Good luck in your fight, but (some unsolicited advice) – don’t let the same thing that happened to me happen to you.

    Like

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