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Official questions severance math

Local governments in northwest Colorado, where natural gas production is the second highest in the state, are not getting their fair share of severance tax revenues, according to Mesa County Commissioner Craig Meis.

Those taxes, paid by gas operators to the state and divvied up with counties and municipalities, are calculated on the number of employees working in the industry.

Two counties with the highest number of oil and gas workers, Mesa and Garfield, lost out in 2005 severance tax revenues because the numbers were miscalculated by the state Department of Revenue, Meis told a gathering at the Northwest Oil and Gas Forum Thursday in Rifle.



In 2004, Garfield County’s severance tax revenues were based on a total of 900 oil and gas employees. This year that number dwindled to 424, according to a report by Jim Evans, the director of Associated Governments of Northwest Colorado. Garfield received $2.6 million in severance taxes last year and $2.1 million in 2005.

Mesa County’s employee count was down from 817 in 2004 to 555 this year, but its revenues actually increased, albeit modestly. This year it received $2.7 million up from $2.4 million last year.



The Department of Revenue’s counts “are not representative of what’s going on here,” Meis said.

He said he was tipped off to the discrepancy by Halliburton, a multibillion-dollar company that provides services to oil and gas producers and locally provides fracturing services. It alerted Meis that 200 of its employees were disqualified by the Department of Revenue, and they were not given a cogent reason, Meis said.

Evans pointed out that 64 percent of the oil and gas workers in the state are employed in Mesa and Garfield counties.

“We have 66 percent of the drilling rigs in the state, so that number (of workers) is right on target because drilling creates employment.”

Perhaps the best illustration of the department’s questionable math is the small town of DeBeque, Meis said. From a reported 21 oil and gas employees last year, the Department of Revenue reported zero workers this year, which is blatantly untrue, Meis said. The mistake cost the town about $60,000 in tax revenue.

Rifle’s tax revenue for 2004 was calculated on 564 oil and gas workers, but this year that number decreased to 89, Evans’ report noted.

The “loophole” may be that, for the Department of Revenue, “contractors who work for more than one operator can’t be counted,” said Steve Soychak district manager for Williams. “But they do it on the East Slope.”

Meis said he’s working to convene a task force to look into the matter and has informed the Colorado legislators about the discrepancies.

“In my opinion, it’s all politics,” he said.

In 2003, the employee counts were also under-represented and the following year, 2004, the Department of Revenue made up for the lower severance taxes to Mesa County, Meis said. But giving more to one county meant taking from another, notably gas-rich Weld County on the Front Range.

“We don’t want more than our fair share, but we want our fair share,” Meis said.

What also rankles Meis is that once the revenues have been distributed, there is no recourse if they believe the amount is based on inaccurate calculations.

Meis said he filed a Freedom of Information Act request with the Department of Revenue for employee count records and was turned down for any but the Mesa County data. “We need to see the numbers for the whole state,” he said.

“Once they’re reported to the Department of Revenue they become secret information,” Garfield County Commissioner Larry McCown said.

McCown suggested when gas operators file their employee reports with Revenue they retain a copy for their own records.

“We support a more equitable distribution (of severance tax),” said Greg Schnacke, executive vice president of the Colorado Oil and Gas Association. “We’d like to see production, well counts and (drilling) permits thrown in (the calculations).”


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