Federal energy lease money hits snag


Federal Mineral Lease Act

Federal Mineral Lease Act money is split between the federal government and the states from lease payments made by companies mining or drilling on federal land. The money is separate from royalty and bonus payments made by those companies to the federal government.

Payment in lieu of taxes

Counties with large amounts of federal land are given money by the federal government as payments in lieu of taxes, often called PILT funding. The federal government pays the money because state and local governments cannot levy property taxes on lands owned by the federal government. The counties, however, often maintain public works on those lands.

A gambit intended to capture more federal money for certain parts of Colorado is unlikely to work, a federal agency has suggested. The finding could cost Mesa County $1.6 million in federal money next year.

The U.S. Interior Department rejected state legislation signed this spring aimed at helping counties such as Mesa to keep federal money in from two separate pots. Interior officials sent their informal opinion last month to Colorado Counties Inc., warning that the legislative fix is likely to be rejected.

The informal ruling isn’t binding, but state and local officials are moving to address the Interior Department’s concerns, said Andy Karsian, legislative coordinator for Colorado Counties Inc.

The Legislature’s fix established mineral leasing districts that would accept lease money paid to the federal government by energy companies. The idea was to establish districts independent of the counties that already receive payments in lieu of taxes from energy companies.

“The whole intent was to maximize the amount of money that comes to locals to address the impacts of the oil and gas industry,” Karsian said.

At least seven county mineral-lease districts were established after Gov. John Hickenlooper signed legislation establishing them last spring. The makeup of the districts was the sticking point, according to the Interior Department letter.

The “key determination is whether the district receiving the funds is truly politically and financially independent of the county,” wrote Denise Flanagan, director of Interior Department’s budget office.

The Mesa County Commission appointed the members of the county’s Federal Mineral Lease District board, and the board makes use of the county’s finance department and is advised by the county attorney’s office, Commissioner Steve Acquafresca said.

Commissioner Craig Meis sits on the mineral-lease board, as does David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, along with banker Craig Springer.

The board is scheduled Friday for a workshop to review applications from local governments and nonprofit organizations for the $1.6 million. Those applications are due Thursday.

Spending any money on what appears to be a quick timeline, however, would “appear to be reckless,” Acquafresca said. Based on the letter, it appears the entire district needs to be restructured, he said.

Members of the board are moving forward with the idea the Legislature can make fixes in the upcoming session, Ludlam said.

It’s also likely that given the Legislature’s fix was deemed questionable, “Interior may follow course of those dollars to see if they are spent in accordance with restrictions,” Acquafresca said.

The main strings governing the use of those funds is a requirement they be spent on the planning, construction and maintenance of public facilities or the provision of public services, according to the Oil and Gas Royalty Act of 1982.

Colorado officials are looking to Utah for guidance on how to construct separate districts to receive and distribute federal mineral lease money without touching the counties, Karsian said. Utah established special-services districts in the 1970s in ways that allow them to receive leasing money without affecting the amount of in-lieu money the counties receive, Karsian said.

The letter from the Interior Department refers to a special-service district as a “body corporate and politic with perpetual succession, separate and distinct from the county or municipality that creates it.”

Such a district also would have to be headed by officers who are not appointed by, removable or hold a position with the associated county, the letter said.


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