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REUTEMAN: One more go-round for Ritter on oil, gas

By Rob Reuteman, Rocky Mountain News (Contact)

Published November 8, 2008 at 12:05 a.m.

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All of a sudden, the second week of December looms large for Gov. Bill Ritter.

That's the week Colorado's oil and gas commissioners give final consideration to new rules for energy drilling that offer further protection for the environment, wildlife and impacted communities.

The oil and gas industry doesn't want any new rules they perceive as impeding energy development. And fresh from trouncing Ritter's ballot proposal to end its $320 million property-tax subsidy, the industry has some newfound leverage. That's because Ritter, in remarks made Wednesday, said he now wants to work harder to get industry execs on board with a compromise plan to boost the state's severance tax revenues.

Ritter has tried hard to avoid any linkage between the new drilling rules and an increase in severance revenue. But such linkage is and probably always was inevitable. His efforts to overhaul drilling rules and raise oil and gas revenue are going on at the same time with the same parties. Politics is the art of the possible, and it's only possible to get oil and gas people on board with a revenue increase if they conclude that new drilling regulations are not onerous.

To his credit, Ritter seemed to get religion on this point late last summer when his chief of staff, Jim Carpenter, began to conduct meetings between oil and gas operators and rule makers. Regulators reversed course on some of the more contentious regulations, such as one that could have subjected companies to 90-day no-drilling periods to protect wildlife. The feuding parties seemed to be coming together, at least until the tough election fight drove them back apart.

In my opinion, Ritter was doing the right thing but for the wrong reasons. Oil and gas operators get a far better deal in Colorado than in surrounding states. New Mexico and Wyoming, for instance, are able to do more for their residents precisely because they have more severance tax revenue than we do. But for Colorado to say it needed the revenue for more scholarships - well, not enough people bought into that. Perhaps if the money were earmarked for transportation, more voters would have been swayed. But absent a more compelling reason to side with Ritter, voters instead bought into a fairly bogus ad campaign that claimed our energy bills would go up as a result. That was baloney, but it was $12 million worth of baloney, and voters finally were bombarded into submission.

Chalk up the ballot proposal as a blown opportunity. And assume Ritter has maybe one more chance to get it right. That's why the second week of December looms large. Oil and gas operators have to feel good about the new drilling rules or they won't play ball with Ritter on getting more severance tax money to address the state's problems. He knows it. Asked Wednesday about final adoption of the new drilling rules, he said, "If we do that, I think it is possible to sit down with the CEOs and talk about the severance tax picture and see if there's any common ground."

One hidden advantage Ritter may have in these negotiations is the election of Barack Obama as president. Obama's campaign rhetoric about green jobs and clean coal and the new energy economy has the oil and gas industry a little spooked. They see a president hellbent on renewable energy, possibly at the expense of fossil fuel. Suddenly, Ritter doesn't seem that bad. He may well be more useful to them as an ally than an adversary.

To comment on this column, go to RockyMountainNews.com/ business.

Comments

  • November 8, 2008

    8:11 a.m.

    Suggest removal

    rushrulesbaby writes:

    C'mon Reuteman you don't think we're going to believe you're crapp about the opposition! Its called 'trickle down taxation' and it always ends in the lap of the consumer who buys the product! It looks like ol' Tax Ritter is gonna haf to change his ways now!

  • November 8, 2008

    9:21 a.m.

    Suggest removal

    galty writes:

    Reuteman is right about severance taxes in a general, theoretical sense only. As it applies to our specific circumstances in Colorado though, he is wrong:
    This severance tax would have hurt Colorado consumers in two ways:
    1- Most drilling in Co is for gas. More gas drilling means lower natural gas prices for consumers, since there are pipeline bottlenecks out of Colorado. Any excess gas helps local consumers. It is not a global supply and demand market for this product.

    2-Drillers in Colorado drill in geology that is not as favorable as in neighboring states. There is lots of gas, but it is often found in marginally profitable rocks. To compete for the huge jobs engine that a drilling rig represents, Colorado must offer better terms for royalty and taxes. That is especially true with declining prices. There's a reason Colorado petroleum is "boom and bust". It's because it is harder to drill here and make money.

    In today's economic environment it would be the height of foolishness to tax and regulate away an important source of economic activity as is the oil business. People may think this is some tax on "fat cats". It would turn into a tax on the thousands of hard-working oil workers whose livelihoods would be put at risk.

  • November 8, 2008

    9:34 a.m.

    Suggest removal

    windbourne writes:

    Ritter SHOULD have done the bill the first way it was talked about. Had it been geared towards infrastructure and job creation, it would have passed. Sadly, it was another entitlement bill.

  • November 8, 2008

    2:20 p.m.

    Suggest removal

    jpclauss writes:

    This development is a sad turn of events that represents a major setback in the fight to control business interests in politics, and more pointedly, our progression in renewable energy changeover. There's been a lot of talk nationally about Prop 8 in California in the context of the national picture of Civil Rights progress with the election of a black president. Well, with that election also came the election of an absolutely inarguable necessity of energy industry reform. The analogy between Amendment 58 and Prop 8 in this sense are 100% equitable. My question: Where was the Pro 58 campaign? Seemingly every other pro-industry initiative had the backing of a group campaigning for its passage, and yet I can recall exactly zero ads in favor of 58. Considering Colorado's higher education funding is near the bottom of all 50 states (as is its severance tax rates), it seems this argument could have been made a lot more effectively. Now, Bill Ritter has to include the extracting companies themselves in this discussion? Might as well let them sponsor the state's legislature. I could not be more disappointed with the gullible and uninformed Colorado voting populace.

  • November 8, 2008

    9:06 p.m.

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    windbourne writes:

    jpclauss,
    I agree with you that our higher education funding is horrible. But 58 would not help it. The reason is that it is subsidies for the tuition. It helps the parents, but it does not help the school. Had Ritter done it the way it was suppose to be done, it would have sent 40-50% to the schools. For buildings, maintenance, even profs. But tuition is a different matter.

  • November 9, 2008

    6:32 a.m.

    Suggest removal

    lastcowboy writes:

    I am from an energy producing county and 58 was going to take the money that we earned and need to upgrade our local infrastructure and send it as far away and to no purpose as possible.
    Our local schools are already wrecked by Gov. Romer's school equlization law. We had the highest paid teachers in the state, now we we are close to the bottom. This is what re-disribution gives you.

  • November 9, 2008

    8:08 a.m.

    Suggest removal

    ghoax writes:

    the governments heavy hand of regulation, and taxation combined with the environmentalists lawsuits put cost us money. Its been reported that 30-50% of what we pay in energy costs goes for those companies to comply with or litigate environmental regulation or lawsuits that wish to stop production.

    If you've ever had the chance to read some of the ridiculous legislation and lawsuits, you'll quickly find out that those behind them are more anti-oil then they are pro environment. Some are so ridiculous that you'd think they were written for the Onion.

    We can get our natural resources with a minimum of impact, yet the environmentalists wish for zero impact which is impossible in any of mans activities.

    The economic cost or "opportunity" of losing what we could have here needs to be reported. How many energy producers are avoiding the hostile Ritter regime right now? How many jobs are not here as a result, how will the decrease in gas production raise our Exel bill?

    The bottom line is that environmentalist obstruction has had the helm for many years, we are facing record energy costs as a result and that needs to change. Our politicians need to use common sense. Promoting for the general welfare includes keeping the obstruction of growth to a minimum.

    Many of the same arguments that are used to stop oil and gas are ignored with the solar and wind installations, so much for the destroying the majestic scenery forever cry.

    Everyone should demand that our officials take off the robe and dunce cap of the green deity and put on some glasses.

    We need cheap domestic energy production, cheap energy period, not more obstruction. We can and have proved that we can get our natural resources without the impact the greens have claimed would happen. Enough is enough.

    Can we afford to continue to pay higher prices for everything, with the tidal wave of inflation and recession coming our way, simply because a small group claims the wildlife might be too embarrassed to mate?

  • November 9, 2008

    11:31 a.m.

    Suggest removal

    mmannino writes:

    Several have made the assertion that higher education funding is horrible. This assertion is absurd. Higher education is lavishly subsidized. On the UC Denver campus alone, there is $1B of new construction planned in the next 10 years. Universities have been on a hiring binge for years. The huge subsidies have prevented lower cost solutions from emerging. There are lower cost solutions to deliver much of the higher education product. Universities, both public and private, have no interest in these lower cost solutions. Private investment cannot compete because of the subsidies and ease with which universities can increase tuition.

    Voters in Colorado saw Amendment 58 as a tax increase, not as a source of free money. Many realized that Amendment 58 would have led to less economic activity in Colorado. There was organized support and funding for Amendment 58. The usual unholy alliance (big labor, Democrats in government, and big business) however did not materialize on Amendment 58. The taxpayers should be happy that the unholy alliance did not force its will on the voters. Hopefully, Amendment 54 will put an end to the unholy alliance on future tax proposals.

  • November 10, 2008

    6:41 a.m.

    Suggest removal

    VVVV writes:

    Gas is a traded commodity. The price we pay is associated with the price California is willing to pay to send our gas their way. The low taxes only dictate how fast and how much they drill it out of the ground, and how profitable it is to them to do so. Raising taxes wouldn't raise prices strictly because those higher costs of production would just push production elsewhere, where the profit was higher, and we would end up getting our higher education paid for by the Californians, who are using more of our gas than we are. The only thing the oil and gas industry was afraid of was getting their profits cut into, and lots of wells becoming unprofitable overnight. It would have cost jobs, but from what I've seen, they kind of need to slow down a bit on the western slope anyway. Claiming that your prices would increase was just an exaggeration to kill the amendment. Of course prices are going to increase, they always do, but at least we could have secured money for our own state that is now going to others that don't really need it.

  • November 10, 2008

    9:12 a.m.

    Suggest removal

    ekim writes:

    VVV writes: "The price we pay is associated with the price California is willing to pay."

    As someone who knows enough to say that I know a little here are the facts as I see them:

    There are numerous pipelines that eminate from Colorado some go to California others go to the midwest and other areas. Gas producers in Wyoming, Utah, New Mexico, Texas, Lousiana, and Appalachia compete Colorado to supply customers in the Midwest, California, and elsewhere.

    Of greatest concern is the that the same "fracing" technology that has allowed producers to ramp up production in western Colorado is now being applied to shale formations in eastern Texas and Lousiana which will compete head to head with Rockies production to supply markets in the midwest and elsewhere.

    Right now the primary suppliers to California are producers in New Mexico and Texas, while most of the new procution in the Rockies is headed to Ohio.

    In other words we are headed for an oversupplied gas market nationwide and our policy makers in Denver are trying to add regulation and taxes to gas production at exactly the wrong time, because they are too lazy to study the economics of the gas industry in our own state so that they know more than I do.

    Instead they follow a myopic belief that Colorado is the only source of natural gas in the nation and that our geology is somehoiw more favorable than that in Wyoming, Utah, New Mexico and Texas.

    Wake up Colorado we have new gas fields in eastern Texas, Louisiana, and Appalachia that are vast in size and easy to exploit.

    I would appreciate it if Governor Ritter would provide me with a detailed explanation of how his policies are going to help Colorado gas compete with producers in other states to protect our energy jobs.

    How are we going to help our producers lower their cost of production so they can win the battle?

    Are we going to help our producers build new pipeilines, are we going to build roads for them, are we going to provide temporary housing for their workers?

    Because I can bet you that Texas and Louisiana are open for business and they are going to take energy jobs away from Colorado.

    What is Colorado's economic plan to save our energy jobs????

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