Severance tax proposal brings fear-mongering from the industry

A coalition consisting of environmentalists, higher education advocates and Western Slope politicians are combining forces to present a severance tax proposal on the ballot this fall. The Denver Post reports,

A final proposal to raise taxes on the oil-and-gas industry in Colorado will most likely go to the ballot through a citizen initiative and not come out of the legislature, a state lawmaker said Wednesday...

That proposal, she said, could be filed as early as today.

"The one they filed before wasn't enough," [Kathleen] Curry said of an earlier proposal from the environmental and higher-education communities. "It didn't provide enough money for the energy-impacted areas."

Oil and gas development is booming in Colorado and the state has a responsibility to the local communities and the taxpayers of Colorado to levy a fair rate of tax on the extraction of our natural resources. The Colorado Oil and Gas Association is resorting to veiled threats to intimidate voters,

Meg Collins, the president of the Colorado Oil and Gas Association, said she has not seen details of a new proposal but said her organization is against plans to increase severance taxes. She said the state can ill afford to hit its largest industry with more taxes as a recession looms.

"It's awfully risky to be proposing a severance-tax increase at this time," she said

As I've noted on this blog before the oil and gas industry has gotten a free pass in Colorado for far too long. The industry has been essentially self-regulated with only industry insiders on the Colorado oil and gas commission and they have been assessed a relatively low tax rate. A Denver Post editorial from 2007 explains,

There is certainly room for an increase that would not undercut Colorado's competitive position with its oil- and gas-producing neighbors. Because of a property tax offset, Colorado's nominal 5.7 percent tax is actually lower than Utah's 4.5 percent. Oklahoma levies 7 percent, New Mexico 9.4 and Wyoming 11.25. Wyoming collected $683.2 million in severance taxes in 2004, almost six times Colorado's tax. Most of the difference comes from Wyoming's higher tax rate.

Colorado has been a place where the oil and gas industry can operate under the eye of friendly hand-picked regulators and extremely low tax rates. Contrary to the exclamations of industry shill Meg Collins now would be a perfect time to raise those rates. Oil and gas rates are skyrocketing and the industry is reaping record profits. What better time to get fair compensation for local communities and Colorado taxpayers?

The oil and gas industry is different from other industries in that they are physically tied to the land where the resources are. Unlike a car factory that can, and will, up and move when hit with higher taxes the oil and gas companies must operate where the resources are. The severance tax advocates is not asking voters to soak the industry and levy punitively high tax rates. All they are asking is to bring Colorado's tax rates in line with neighboring states thus benefiting local communities and the states higher education fund. It's an eminently reasonable position and one that Colorado voters should not be intimidated or bullied into continuing oil and gas's near free ride in this state.