Colorado Initiative 71 (2008)

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Initiative 71 would eliminate the tax exemption for low-production wells, would impose an additional 5% tax on gross income of $300,000 or more from the sale of oil and gas, 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.

The official ballot title of the measure reads:

State taxes shall be increased $299.1 million annually by an amendment to the Colorado Revised Statutes concerning the severance tax on oil and gas extracted in the state, and, in connection therewith, for taxable years commencing on or after January 1, 2009, imposing an additional severance tax on oil and gas for taxpayers with three hundred thousand dollars or more of gross income; exempting revenues from the additional tax from state and local government spending limits; and requiring specified percentages of the revenues from the additional tax to be credited to (1) the clean energy fund, (2) the local government severance tax fund, and (3) the land conservation fund that the measure creates to be used for awarding grants for the acquisition of land or interests in land for preservation of land and water resources.

Details of the measure

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. Two of the original four measures submitted have since been withdrawn by the group.

In this 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 both before and after January 1, 2009, by:
a. Eliminating an exemption for oil wells that have minimal production for taxable years prior to January 1, 2009; and
b. Imposing an additional tax on the gross income equal to or in excess of $300,000 attributable to the sale of oil and gas severed from the earth on or after 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.


See also:

  • Colorado Initiative 68 (2008)
  • Colorado Initiative 69 (2008) was withdrawn by its proponents
  • Colorado Initiative 70 (2008) was withdrawn by its proponents


Supporters

The measure—along with two 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 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]


Governor tries to negotiate compromise

Gov. Bill Ritter's office has contacted various groups and energy companies—including BP, Colorado's largest natural gas producer—to amicably discuss a way to increase the state severance tax.[5]

"We have been asked for reactions to various severance tax proposals by the governor and others, and we are evaluating those options," said Jack Rigg, BP's regional manager of government and public affairs. "We haven't seen anything yet that we would not oppose."[5]

"The administration is very anxious to not face a united oil and gas opposition," said Denver pollster Floyd Ciruli. "Not having BP (on board) is a sign of the difficulty they face."[5]

BP's strong stance bolsters the position of the Colorado Oil & Gas Association, which has said it will oppose any attempt to increase the severance tax.[5]


Status

The measure has been given a ballot title but still needs to have its petition form approved before signature gathering for the measure can begin.


See also


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References