Production decreases and depressed prices for natural gas and other extraction commodities is what’s causing local governments in Colorado to see nearly half what they normally might get in federal mineral lease royalty payments.
Gregg Rippy, president of the board of directors for the Garfield County Federal Mineral Lease District, and Dusti Reimer, grant administrator for the Mesa County mineral lease district, both pointed to those factors as why each are seeing about a 45% drop in payments from last year.
The two just received their annual disbursement checks from the Colorado Department of Local Affairs. For Mesa County, the district got $495,556, while Garfield received $656,798.
Last year, the Mesa District was given $925,022, while Garfield County got more than $2.7 million.
All other local governments saw similar drops in what they received this fall compared to last year.
“It’s a combination of lower price of natural gas, a combination of no new leases in the last 12 months, and production numbers,” Rippy said. “The amount that we got for the entire year, we granted out more than that because we still had some reserves.”
Earlier this week, the Garfield County district announced $800,000 in grant awards for such things as a water treatment backup system on Battlement Mesa, and $200,000 each for Rifle and Silt for street improvements.
The money comes from royalty payments that oil, gas, coal and other private companies pay from production on leases they have on federal lands, which each pay a certain percentage based on what they make.
For oil and gas drillers, it’s 12.5% of those profits, and that money is split 55% to 45% between the federal governments and the states where those leases are located.
Earlier this year, the Trump administration attempted to offer reduced royalty payment percentages to extraction companies as a way to help their bottom lines because of the COVID-19 pandemic, but much of that was blocked.
As a result, the reduced payments to local governments this year had nothing to do with those royalty percentages, Reimer said.
“It has nothing to do with the Trump administration whatsoever,” she said. “It has to do with a combination of drilling and production are down in Colorado and that prices for the commodities are also down.”
Next week, the Mesa County mineral lease board is hosting a budget meeting to discuss how it will disburse this year’s share.
Reimer said that some may be allocated to its permanent investment fund, created a few years ago to continue to be able to award grants in future years in case federal mineral lease payments are reduced to a trickle.
“It will be up to the board to make the decision to invest anything this year,” Reimer said. “The goal for us is to get it to a point where we can draw $1 million off the fund without having an impact to the fund for further grant cycles to continue.”
Currently, the district has about $1.7 million in that fund, but in order for it to be meaningful, it’s shooting for about $22.5 million, she said.
Other local governments that received payments compared to last year’s allocations include $231,791 to Grand Junction, down from $424,690 last year; $55,934 to Fruita, compared to $100,675 in 2019; and $68,578 to Delta County, which saw $103,929 last year.