State supreme court deals blow to county gas drilling impact fees

Impact fees assessed against equipment used by oil and gas companies in Rio Blanco County – most notably ExxonMobil – took a big hit this week when the Colorado Supreme Court Monday rejected a county request to rehear the case.

Rio Blanco County impact fees are unique in the nation and viewed by some observers as an effective means of recouping county infrastructure costs associated with energy production without relying on state funds from severance taxes. The concept of similar fees being imposed in nearby Garfield County became a political issue in the 2008 commissioners’ race.

But, according to the Grand Junction Daily Sentinel, the Colorado Supreme Court upheld an appeals court decision finding that construction use taxes approved by the state legislature should not apply to equipment associated with natural gas drilling. ExxonMobil had filed suit against the county in its efforts to collect nearly $750,000 in use taxes for 2003 and 2004.

According to the county attorney, the Colorado Supreme Court did not clarify whether such use taxes can be applied to broader industrial undertakings, not just residential or commercial development.

“I think it’s only a matter of time before somewhere, somebody ends up in more litigation because it’s just not clear — an area that needs to be clarified,” county attorney Kent Borchard told the paper.

Western Slope energy advocates say ExxonMobil, which declined comment for the Daily Sentinel story, has been the hot topic in the high country after moving to acquire natural gas giant XTO Energy. One observer called ExxonMobil “the T-Rex of the energy industry,” with the ability to radically reshape the face of natural gas production in the state.

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