Colorado Communities Feel Pinch In Severance Tax Loss

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Jim Hill, KUNC/KUNC

Weld County, one of the centers of the oil boom in Colorado, received $14,507,445 in direct severance tax funds in 2014, and nearly as much in grants. Some of those funds are used to mitigate the impacts of industry in the county, like increased truck traffic.

Severance taxes are what energy companies pay to the state for the oil, gas, coal, or other minerals they take out of the ground. Each year that adds up to a lot of cash. In Colorado, half of that money is supposed to go back to cities and counties impacted by energy development.

That’s why when Colorado lawmakers voted to take $20 million away from the state’s severance tax fund for the 2015/2016 state budget, Weld County Commissioner Barbara Kirkmeyer wasn’t happy.

“Every year they try to take it. So we fight this every year,” said Kirkmeyer.

There’s little county officials like Kirkmeyer can do to keep the state from dipping its fingers into the severance tax pie. She tries, though, pointing to the benefits of using severance taxes locally, particularly in energy-affected areas like Weld and Garfield counties.

When severance taxes are collected, half of that goes to fund the state’s Department of Natural Resources. The other half is distributed directly and through grants to energy impacted communities. More than $150 million went to 515 infrastructure and economic development projects in 2013 and 2014, according to an analysis of state records by Rocky Mountain PBS I-News.

“It has funded the rec center in Windsor, the rec center in Erie, the rec center in the Carbon Valley area, the rec center in Fort Lupton,” said Kirkmeyer.

“It has funded fire trucks and fire stations in Kersey, in Evans, in Fort Lupton, in Hudson, the list goes on.”

That’s why State Representative Jon Becker, a Republican from Fort Morgan, voted against the state shifting $20 million out of the tax fund.

“These dollars help with the oil and gas impact to each of these communities,” said Becker.

“And therefore they can build roads, infrastructure, or whatever in order to keep up with the growth caused by this gas boom.”

The funds can even mitigate the impacts of a downturn, Becker added. Road improvement projects are another big way severance funds are used.

In Weld County, where the impact of trucks has been significant, the county is working to widen County Road 49, which runs north-south between U.S. 76 and Highway 34, near Greeley. That road, which parallels Highway 85 and sees a lot of oil and gas truck traffic, will be widened and repaved, making it a lot safer, said Commissioner Kirkmeyer.

Kirkmeyer has firsthand knowledge of the importance of severance taxes to local communities across the state. She oversaw the grant program during the administration of Governor Bill Owens.

Later, she watched it get raided repeatedly all four years of the Ritter administration. Now that $20 million has been cut out of 2016’s allotment, she has a message for state lawmakers.

“They should stop sweeping funds that are supposed to be used for impacts from the energy industry, and start looking at how they prioritize their funds in their budget just like every other government has to do,” Kirkmeyer said.

The debate over whether these taxes should go to local governments or be used for the state budget isn’t unique to Colorado.

A lot of states with booming energy economies, including North Dakota and Pennsylvania, are having the same discussion, said Barry Rabe, a professor of public and environmental policy at the University of Michigan.

“Does that revenue get distributed broadly across the state or do you target needs in particularly communities that are developing the resource? That’s a really tough political question,” Rabe said.

That tough question could get even tougher for Colorado lawmakers as severance tax revenues drop, following low oil prices. So no matter how the money gets divvied up next time, there’s going to be less of it.