Counties revising Federal Mineral Lease District Act
Post Independent Staff
Glenwood Springs, Colorado CO
GLENWOOD SPRINGS – The enabling legislation for Garfield County’s new Federal Mineral Lease District, created earlier this year to maximize the flow of federal funds offsetting gas industry impacts, needs repair in order to work properly.
The state Legislature passed a law in 2011 to make it possible to form the districts. But now that law must be amended, according to local and regional officials, to correct certain deficiencies and flaws that would interfere in the district’s operations.
Garfield and seven other counties – Routt, Moffat, Rio Blanco, Mesa, Delta, Park and Weld – earlier this year formed lease districts, or FMLDs.
The districts are a conduit for funds paid by the oil and gas industry to the federal agencies that manage public lands where drilling is taking place.
Federal mineral lease payments, as well as mineral severance taxes, are passed on to the counties as compensation for the industry’s impacts on roads, water, housing and other local resources.
Garfield County Attorney Andrew Gorgey has been working with other county attorneys and officials to come up with amendments to the 2011 Federal Mineral Lease District Act.
The amendments will allow the district to operate as it is meant to, including the ability to distribute funds to local towns in order to offset energy industry impacts.
The original act, Gorgey explained to the Post Independent, contains flaws and shortcomings that interfere with the functioning of the districts.
Among the deficiencies, he said, is language that requires the district to distribute its funds only “within the boundaries of the district.”
Municipalities are not in the district, technically speaking, which meant that under the 2011 act the county could not distribute FMLD funds to local municipal governments, Gorgey said.
The 2012 amendments, Gorgey explained, will correct that, as well as completely remove nearly all vestiges of control of the FMLD from the hands of the county commissioners.
“If this legislation passes, you are giving up power for all time,” he told the Garfield Board of County Commissioners (BOCC) during a meeting last month.
All decisions about how to distribute the money, under the new act, will come from the district’s board of directors. While appointed by the BOCC, the board would be an independent body, Gorgey told the Post Independent.
Currently, the board is made up of Commissioner Mike Samson of Rifle, Gregg Rippy of Glenwood Springs, and Eric Schmela of Carbondale.
In 2010, according to the state Department of Local Affairs, Garfield County received nearly $2.6 million in federal mineral lease payments, which went into the county’s budget.
With the district in place, those funds will no longer be part of the county’s finances.
Gorgey said the county’s $3.6 million in federal mineral lease payments for 2011 were deposited in the district’s bank account.
The idea for the districts arose, in part, because the county was losing a portion of each year’s Payment In Lieu of Taxes, or PILT, thanks to a quirk in federal law, according to County Commissioner John Martin.
The PILT payments are the federal government’s way of providing funds to counties that contain large amounts of federal land to make up for property taxes that would have been collected if the land was privately owned.
Under federal guidelines, federal payments from lease fees to the county for one year are subtracted from the following year’s PILT payments, a practice called “prior year offset.”
Because of this policy, Garfield County has lost as much as $400,000 per year from its PILT payments, which previously amounted to as much as $1.2 million per year.
But payments to the new leasing district’s accounts are not subject to this kind of bureaucratic arithmetic, Martin said. So the eight counties that have formed leasing districts should get to keep every dollar they are owed in PILT and mineral lease payments.
Gorgey said the 2012 amendments to the FMLD Act have been submitted to the Office of Legislative Legal Services at the state Legislature.
A bill outlining the changes is expected to be introduced into the next legislative session by state Sen. Jean White, R-Hayden, who represents Garfield County.
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