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State oil and gas conservation commission dealing with a $5.6 million budget shortfall

Commission is proposing tax hike on industry
Posted at 5:07 PM, Feb 09, 2018
and last updated 2018-02-09 21:07:18-05

DENVER -- The state agency charged with overseeing oil and gas safety, regulations and drilling permits is about to run out of money -- if commissioners don't approve a tax hike.

"The budget issue is certainly concerning, we have a shortage of money," Todd Hartman with the Colorado Oil and Gas Conservation Commission (COGCC) explained.

Despite hundreds of new wells being drilled statewide and an added demand for oversight, COGCC is projecting a $5.6 million budget shortfall.

Hartman said the agency is taking steps to address the shortage and the issue boils down to two things.

"Severance taxes have come in low, commodities prices have been lower than in the recent past and that's affected the amount of severance tax," he said. "And then a court ruling that allowed operators to deduct more of their expenses before they pay that severance tax."

COGCC's budget is around $18 million a year.

Hartman said about two-thirds of it comes in the form of a mill levy, which is basically a small tax on the volume and value of the oil and gas produced in our state. The rest comes from severance taxes, which is also an operator tax.

Hartman said upping the mill levy tax is where the commission is looking to add revenue.

"That mill levy had not kept up with the growth of that agency and so that mill levy needs to be increased," he said. "Looking to raise it by 4/10 of a mill."

An increase that will mean an extra $4 million in added revenue for the agency.

COGCC is responsible for reviewing and approving new drilling permits in the state as well as ensuring public health and safety. With such an important oversight role, many have questioned how the commission can do its job without enough money.

"We certainly appreciate the public's concerns on that front which is why this is a priority both at the commission level and at the governor's office," Hartman said.

For now, Hartman said the agency is still able to fund all its operations -- but if the commission doesn't sign off on the mill levy hike during a rule-making hearing on Monday, the agency could be in a lot of trouble come July 2018.

"The demands on the oil and gas conservation commission continue to growth," he said.

Dan Haley, the President of the Colorado Oil and Gas Association, who represents the oil and gas industry across the state said in a statement, "It’s critical that Colorado’s energy oversight agency has the necessary funds to efficiently regulate, conduct appropriate inspections, and review permit applications in a timely manner. But since this tax hike will be on top of the additional costs that we expect to come out of the flowline rulemaking, our focus will be ensuring that the funds we’re contributing will be used effectively for their intended oversight purpose.”

"The severance taxes currently being collected aren't at a level that can fund much of what Coloradans expect ... not just the commission for oversight of the industry, but also water projects, critical infrastructure grants to local communities to deal with impacts from energy development," Jacque Montgomery a spokeswoman for the governor's office said in a statement. "We are watching severance revenue numbers closely, talking with stakeholders including the oil and gas industry, and looking at a number of options.  It's too early to say where things will land."