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Oil, gas industry opposes tax increase

Gargi Chakrabarty

Published December 19, 2007 at 12:05 a.m.

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Colorado's oil and gas industry will not support any increase in severance tax that the state collects from energy companies, a top industry executive said Tuesday.

"This is a low-margin business," said Jay Still, executive vice president of Pioneer Natural Resources who recently became chairman of the Colorado Oil and Gas Association, a trade group in Denver.

"Severance tax comes right off the top of our expenses, and any increase in the tax rate would have big impact on our financial health. We pay our fair share of taxes."

Still also said the industry will not accept any reduction in the property-tax credit that companies deduct from severance tax, a tax companies pay the state on production. His presentation at the Wells Fargo building at 1700 Lincoln St. in downtown Denver outlined the challenges the industry anticipates in the upcoming legislative session.

A recent Rocky Mountain News analysis found that the overall tax burden for oil and gas companies in Colorado was 5.7 percent of production, compared with 11.2 percent in Wyoming and 9.4 percent in New Mexico. Only Utah had a lower rate burden, at 4.5 percent.

Drillers in Colorado can credit 87.5 percent of property tax they pay to their severance tax. In some cases, the credit was so large that producers in 25 of the state's 30 energy-producing counties paid no severance tax in recent years.

The state uses the money for various projects, many of which address the effects of drilling on communities.

Any hike in the severance- tax rate would eventually have to go to voters for approval. The earliest would be in 2009.

Evan Dreyer, spokesman for Gov. Bill Ritter, said Ritter is formulating a decision on severance tax.

Comments

  • December 20, 2007

    8:23 p.m.

    Suggest removal

    justright writes:

    I hope Ritter and the liberals realize that raising taxes on companies has two impacts. The first is companies spend less where taxes are high, thus they leave the state or scale back on their activity. The second impact is higher prices for voters. Higher gasoline prices, higher heating bills and higher prices for food are only the beginning. See it is all about supply and demand. Demand began out stripping supply in about year 2000. Unfortunately neither Democrates or Republicans know that yet. The financial danger to all citizens is the crazy idea that wind, sun, corn are going to some how transition us to a new power source. A basic physics class would enlighten these false hopes.
    Under some conditions these sources help but the reason they are more expensive then fossil fuels is you have to build a fossil fuel power plant too run the 92% of the time that renewables are working. A little reality is what is missing in todays political speak.