Lawmakers at odds on competing oil and gas severance tax amendments

Oil well on Colorado's Western Slope. (Photo/picture taking fool, Flickr)

Oil well on Colorado's Western Slope. (Photo/picture taking fool, Flickr)

State lawmakers and energy experts are hotly debating a pair of dueling oil and gas severance tax questions on the Nov. 4 ballot, with even some Republicans divided on Amendment 52, which is being touted by conservatives as an alternative to Gov. Bill Ritter’s Amendment 58 tax hike.

Sponsored by state Sen. Josh Penry (R-Grand Junction) and state Rep. Frank McNulty (R-Highlands Ranch), 52 would amend the state constitution to direct half of all current oil and gas severance taxes (or about $225 million over the next four years) toward road improvements, with an emphasis on Interstate 70. It would not increase the current severance tax rate of about 1.9 percent after various exemptions.

Ritter’s statutory Amendment 58 would increase that rate to five percent by rolling back those property tax exemptions for oil and gas companies and reducing the level of production that qualifies a well for another tax exemption. Overall it would bring in another $321 million a year, which would then be allocated to state college and university scholarships, wildlife habitat preservation and renewable energy production and efficiency projects.

“Amendment 52 is a common-sense solution that re-prioritizes existing revenues, and some have tried to put it as a counter to Gov. Ritter’s tax increase, but we brought this measure forward to make a down-payment on funding our transportation infrastructure,” said McNulty, who tried to pass an unpopular I-70 toll last legislative session.

But even the characterization of 58 as a tax increase rankles some proponents, who argue it merely rolls back unreasonable tax breaks for an industry enjoying record profits, bringing the state’s severance tax to a level more in line with neighboring states such as Wyoming and New Mexico.

“I think the current system is an outrage, and I don’t think we need to subsidize the largest and most profitable industry on the planet,” said Randy Udall, an Aspen-area independent energy consultant who is the brother of U.S. Senate candidate congressman Mark Udall.

Randy Udall’s 2006 whitepaper entitled “Torched and burned: Why does Colorado subsidize the world’s most profitable industry?” points out that in 2005 Colorado collected $132 million in severance taxes. That same amount of production would have produced $384 million in severance taxes in Wyoming and $479 million in New Mexico.

Udall said voters should shoot down 52, which does nothing to end that disparity, and support 58, because it will help alleviate Colorado’s chronic revenue shortages when it comes to funding education, transportation and other vital infrastructure projects.

McNulty, a supporter of increased oil and gas production, said there is no more critical infrastructure project in the Colorado than fixing gridlock along I-70 — the state’s main east-west highway, both for tourism and as a link to the rich natural-gas fields of the Western Slope.

He cited a Denver Chamber of Commerce report that indicated I-70 congestion costs the state $800 million a year in lost wages, jobs and revenue, and he pointed out that 52 is the only question on Colorado’s lengthy 2008 ballot that addresses critical transportation needs.

“I think too much is being made about this focusing exclusively on I-70,” McNulty said, referring to the Western Slope lobbying group Club 20 pulling its support for Amendment 52 because of its emphasis on I-70. “The way the ballot language reads is that the money is to go towards transportation infrastructure with priority given to easing congestion on I-70 — a simple recognition of how important I-70 is to Colorado as a whole.”

But that’s exactly one of the reasons McNulty’s fellow Republican, State Rep. Al White (R-Hayden), is leaning toward opposing 52.

“The dollars that they’re talking about raising, though substantial, are really a pebble on a gnat’s behind when you look at our overall transportation funding needs,” White said, “and so there would still be some other element of funding — a significantly large element of funding — necessary to accomplish even just maintenance of what we have, let alone reconstruction.”

The $60 million a year for I-70 would be a drop in the bucket compared to the state’s overall needs of $500 million more a year to maintain the current network of roads and another $1 billion a year to fund major reconstruction projects.

White, a member of the Joint Budget Committee who is term-limited but seeking the state Senate District 8 seat for Northwest Colorado, favors keeping state income taxes at their current level after Referendum C expires and dedicating those funds to transportation, or increasing the statewide sales tax from its current 2.9 percent to 3 or 3.1 percent to pay for roads.

State Rep. Bernie Buescher (D-Grand Junction), who chairs the Joint Budget Committee and served on the state transportation commission for five years, said that it will be an unpopular debate during the next legislative session but funding transportation is the most critical issue facing the state.

“Folks do want their roads taken care of, but it tends to not be a priority until something happens like the catastrophe last summer in Minneapolis when a bridge collapses,” said Buescher, the presumptive next Speaker of the House if he’s re-elected in November. He agreed with White that a tax increase is likely the only viable solution, but he also said fees may have to be part of the fix.

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About the Author

David O. Williams

David O. Williams is an award-winning reporter who has covered energy,
environmental and political issues for the Colorado Independent since
2008, delivering impact journalism on a wide range of topics. A former
editor for the Vail Daily and Vail Trail, Williams’ work also has
appeared in numerous publications since 1988, including the New York
Times, Chicago Tribune and Denver Post. He appears periodically as a
guest on Rocky Mountain PBS and David Sirota’s show on 760 AM in
Denver. Williams is the founder, part owner and editor of Real Vail
and Real Aspen.

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