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Colorado Initiative 70 (2008)

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Initiative 70 would eliminate the tax exemption for low-production wells, and would require that a portion of severance tax revenues be used to promote renewable energy sources, energy conservation, and to preserve land and water resources for the protection of wildlife habitat.

This measure is a citizen-initiated state statute.


Details of the measure

In the measure's Review and Comment Hearing memorandum, the measure's purpose was summarized this way:

  1. To modify the state severance tax on oil and gas that was collected before, on, and after January 1, 2009, by eliminating an exemption for oil wells that have minimal production for taxable years prior to January 1, 2009.
  2. To permit the state to retain and spend all the revenues received from the modified tax on the severance of oil and gas notwithstanding the constitutional limitation on fiscal year spending or any other spending limit; and
  3. To modify the distribution of oil and gas tax revenues.

Several similar versions submitted

The sponsor, the Colorado Environmental Coalition, has submitted four ballot proposals on the subject, which include different combinations of getting rid of the current tax exemption for small wells, adding an extra 3% tax for all oil and gas wells, and setting a new 10% tax rate for wells that produce more than $300,000 a year. Two of the proposals would also eliminate the ability for energy companies to deduct their property tax when calculating their severance tax liability.

See also:


Supporters

The measure—along with three other very similar measures— is being sponsored by the Colorado Environmental Coalition, which includes Trout Unlimited, Environmental Defense, The Wilderness Society, and others. Joe Neuhof, West Slope field director for the Colorado Environmental Coalition, said some coalition members have been involved in the discussions at the Capitol about submitting a proposal to voters to raise the tax, but the initiative proposals allow them to put forward their priorities for how the money should be spent as they continue to talk.

Rep. Kathleen Curry, D-Gunnison, said she expects to introduce a severance tax proposal within the next week that could either get rid of the property tax deduction or raise the tax. She didn't see the ballot proposals as a threat to her effort. "I think this just sends a strong signal to us here that people want this addressed," she said.[1]

The environmental coalition would have to collect signatures to get any of its proposals on the ballot, but lawmakers could simply vote to refer a measure to voters.


Opponents

Sen. Josh Penry, R-Grand Junction, has threatened to launch a counterproposal if anyone presses ahead with an oil and gas tax hike. He said that until the state knows exactly how new rules the Colorado Oil and Gas Conservation Commission is developing will affect the industry, any talk of a severance tax increase is premature. "These people are dreaming if they think a severance tax (increase) is going to be easy to push through," Penry said.."[2]

"The proposed rules will undoubtedly result in less of the clean natural gas Coloradoans rely on as part of their secure, stable, and affordable energy supply," Meg Collins, president of the Colorado Oil & Gas Association, said.[3]

Stan Dempsey, president of the Colorado Petroleum Association, said the large energy companies as well as independent firms in his group would oppose raising the tax rate or getting rid of the property tax deduction. He said he is unsure why Coloradans would want to "harm an industry that is a strong economic driver" in Colorado. "I think that when our companies look at the economics associated with projects, we look at both the tax environment and the regulatory environment," Dempsey said, "and by raising the severance tax, we are creating less incentive for our members to operate in Colorado."[4]


Status

The measure was withdrawn by the proponents on March 19, 2008.


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