Consider this: You get to read your own natural gas meter and notify Xcel how much energy you have used for the month. Xcel can’t read the meter to verify your usage; they have to trust you with the “correct” numbers.
You would sign up for this program, wouldn’t you?
Right now, this scenario is exactly what the oil and gas producers have in Colorado and Rep. Kathleen Curry’s (D-Gunnison) House Bill 1142 aims to change it.By current state law, only the well producers can meter production levels. They are entrusted to report correct information to gas royalty owners, county assessors, the state auditor and the federal government on how much gas and oil is being extracted. These company-produced figures are taxed by governments and determine royalty payments.
Naturally, the more a gas company produces, the more royalty payments and taxes it must pay.
Several years ago, Mary Ellen Denomy, a certified petroleum accountant and a fraud deterrent analyst from the Rifle area, noticed that one local drilling company reported much lower production figures to royalty owners than what they had printed in their yearly report to investors.
Based on the information from that report, the royalty owner that Denomy represented successfully sued the drilling company for an estimated underpayment of $750,000. Another case is pending over a possible $4 million underpayment to a different oil and gas royalty owner.
“Remember, if the royalty owners were shortchanged in this case, the county, the state and the feds were underpaid as well,” Denomy explained.
The court ruling has prompted the new Garfield County assessor, John Gorman, into pursuing an audit of all oil and gas production in the county.
Since no government official can currently “read the meter” of a producing oil and gas well because of its private corporate content, there is no way to double check gas company figures. According to Denomy, the state auditor doesn’t even have an accurate count of how many oil and gas production meters there are and which ones need to be inspected for accuracy.
“I heard of a gas well that produced for over a year before someone figured out the meter was broken,” Denomy related.
Hence, it is probable that oil and gas production numbers have been under-reported in Colorado for a long time, Denomy said. “That means local governments could have been shorted severance tax revenues forcing local taxpayers to pick up the tab for drilling impacts,” she said, noting the example of the local Rifle school system. It has had to go to the voters three times in the past six years to raise monies to expand crowded schools.
Armed with Denomy’s information, Rep. Curry has proposed this verbiage in her HB 1142:
“Establishes that all statements and documentation filed with a county assessor related to the valuation of an oil or gas leasehold or lands are public recorded that are available for inspection, instead of being considered private documents.”
In short, Curry’s bill would allow county assessors to investigate production metering and reporting. So far, no state senator has stepped up to co-sponsor the bill.
“Private citizens and business owners have to open their records to government officials,” Denomy stated. “Why shouldn’t the oil and gas companies have to do the same?”