Higher energy taxes shouldn’t hurt industry, research shows

GLENWOOD SPRINGS — A new study has concluded that Colorado effectively taxes energy production nearly 10 percent lower than Wyoming and could raise its rate without risk of driving away the industry.

A ballot proposal this fall, Amendment 58, would increase how much severance tax Colorado collects on oil and gas production. The state’s energy economy shouldn’t be affected if the measure passes, according to the study by Montana-based Headwaters Economics, an independent nonprofit research group.

Other states have used the higher revenue to boost state coffers and help mitigate local impacts of energy development.

“You don’t want to be a resource colony. You want this wealth to work for you,” Headwaters staff member Mark Haggerty said in presenting the study’s findings Friday at an economic symposium in Glenwood Springs.

The study looked at tax collections in Colorado, Wyoming, New Mexico, Utah and Montana.

Haggerty said it found a surprising disparity in effective tax rates on energy production in those states as of 2006, ranging from 6.2 percent in Colorado to 15.9 percent in Wyoming.

In calculating those figures, Headwaters considered how much each state and its local governments receive in severance and other production taxes, in property taxes and in royalties on oil and gas, coal and other energy-producing operations.

Amendment 58 would increase Colorado’s severance tax collections by eliminating the ability of energy companies to get a tax credit for most of the property taxes they pay. Haggerty said the study found no evidence to suggest industry is choosing to operate where rates are lowest.

It said production taxes can be deducted from a company’s federal income taxes, so the industry doesn’t feel the full effect of tax increases.

Wyoming considered reducing its production tax rate to attract more industry investment, but decided against it. Yet the state is experiencing an energy boom, and reaping the benefits of keeping its taxes
higher, Haggerty said.

Montana, in contrast, cut its energy taxes, but there’s no evidence that increased energy production resulted, and it gave up about half a billion dollars in tax revenues in the process, he said.

The study also says Colorado’s heavy reliance on property taxes paid by the industry is problematic because the tax payments lag two years behind the associated production, making it hard to get enough money to address impacts in a timely fashion.

Also speaking in Glenwood Friday, Colorado state geologist Vince Matthews warned that there’s no guarantee steady growth in regional energy development will continue, especially in the short term.

Opportunities for drilling in other parts of the country could draw off some companies, he said.


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