Emily Anderson
Grand Junction, CO, Colorado

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October 21, 2008
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The facts on Amendment 58

GRAND JUNCTION " Rumors have swirled across Colorado for months that Amendment 58, if passed in the general election next month, will frighten away oil and gas producers and bump up heating costs in the state.

It turns out neither assertion may be true. But the amendment will increase the amount of taxes energy companies pay and lift the severance tax rate in the state from the cheapest among eight Western states to the third lowest.

Currently, oil and gas companies get a state severance tax deduction worth 87.5 percent of the local property taxes they pay. Amendment 58 would eliminate that tax credit, start taxing smaller wells and start taxing energy companies earning $300,000 or more a year at 5 percent of their income. The tax waivers between 2 and 5 percent now.

These steps combined would bring in an extra $101 million for the state next year and $1.1 billion over the next four years " almost double the amount the state would get between 2009 and 2012 under current law.

Susan Alvillar, spokeswoman for Williams Energy, said the company believes it's paying its "fair share" of taxes already and is not looking forward to paying more. But the company, which employs 260 people and 3,000 shared contractors in Western Colorado, is not planning to move and will even consider negotiating tax solutions if the amendment doesn't pass, Alvillar said.

"Williams is committed to a long-term presence in Colorado," Alvillar said. "We've committed billions to infrastructure and operations in western Colorado. We do not plan at this point to curtail any of our business."

That could change if outside factors interfere, such as an inability to obtain leases, she added.

According to Colorado Media Matters, Colorado's tax rate falls behind 2006-2007 rates for Utah (2.1 percent), Kansas (2.8 percent), Texas (4.4 percent), Wyoming (4.5 percent), Oklahoma (5.6 percent), New Mexico (6.6 percent), Louisiana (7.7 percent), Montana (8.5 percent) and Alaska (12.5 percent). In 2007, Colorado's tax rate was 1.3 percent.

In Colorado, severance tax is split between the Department of Local Affairs and the Department of Natural Resources. Amendment 58 would slide that 50 percent figure for each over to 22 percent apiece. Colorado's Blue Book says even with the decrease in percentage, the two groups would likely receive about the same amount of money, although fluctuations in the energy industry could send more or fewer dollars their way.

Of the remaining 56 percent, 10 percent would go to a rainy day fund and 90 percent would be spread out among college scholarships (60 percent), wildlife preservation (15 percent), renewable energy projects (10 percent), transportation projects in energy-impacted communities (10 percent) and water projects (5 percent). Mesa State College endorsed the amendment last month due to its scholarship component, and environmental, education and conservation groups have helped shore up $3.7 million to help promote the amendment through issues group A Smarter Colorado.

George Merritt, a spokesman for A Smarter Colorado, said the options were chosen to solve specific problems in the state. Opponents of the amendment say it may be unstable to fund so many programs with tax dollars that are subject to fluctuation.

State Sen. Josh Penry, R-Grand Junction, has decried the amendment's buffet-style approach and Collbran Republican Laura Bradford has stated in several debates her dissatisfaction with the amendment.

"It's going to cost us in jobs, it's going to cost us in homes, it's going to cost us in health insurance " how dare they try to pass this?" she said at a Republican event Friday.

Heating bills are another place labeled in ads funded by the anti-58 group Coloradans for a Stable Economy as a potential target for cost increases if the amendment passes. The ads from Coloradans for a Stable Economy, an issue committee that's received nearly $10 million from oil and gas operators, say the cost of the tax credit leaving will be "passed through" onto Xcel Energy bills.

Xcel spokesman Joe Fuentes said he could not confirm or deny what could happen if the amendment passes, but he said supply and demand, not taxes in one state, have the most sway over heating bills.

"The bottom line is whatever the cost that we incur will be passed on to customers. We expect gas prices to go up (this winter), but that has nothing to do with the current amendment. That's just what the price of natural gas is," Fuentes said.

Fuentes said some of the company's natural gas supply may come from Colorado, but he doesn't know how much.

"Once it's in the pipeline, we buy it. It's interconnecting. We don't know where the gas comes from," he said.

Dan Hopkins, a spokesman for Coloradans for a Stable Economy, said Colorado's natural gas will end up somewhere and that shareholders in energy companies won't allow those companies to absorb the severance tax cost.

"It's going to be passed through here or in another states," Hopkins said.

Hopkins added the tax credit " created in 1953 before severance taxes even existed here " has the same philosophy behind it that it had then: Cutting state taxes makes it easier for energy companies to pay local taxes, no matter how high they get.

"If you give the oil and gas industry a credit, they'll be more supportive of local tax increases. It was to encourage oil and gas to invest in local communities," Hopkins said.

Reach Emily Anderson at eanderson@gjfreepress.com.

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The Post Independent Updated Oct 21, 2008 09:35PM Published Oct 21, 2008 09:35PM Copyright 2008 The Post Independent. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.