Amendment 58 Becomes Costliest Issue In Colorado History
3:45 AM, Sep 20, 2008
Supporters and foes of ending a tax credit for the oil and gas industry have raised more than $12 million, making it the costliest issue campaign in Colorado history -- and the election is still six weeks out. Amendment 58 would end tax deductions that allow the industry to take a credit of up to 87.5 percent of the prior year's property tax liability from their severance taxes. Most of the estimated $300 million raised annually as a result would go to college scholarships, with the rest going to communities affected by energy development, wildlife habitat and clean energy projects. Gov. Bill Ritter is leading a coalition of groups in support of the initiative. Lined up on the other side are some of the industry's biggest players. Exxon Mobil, Chevron, BP America, ConocoPhillips, EnCana, Williams and Anadarko have pitched in $1 million apiece -- part of $10 million overall contributed by energy companies. The initiative's proponents says the industry can afford to give up a tax loophole that makes Colorado's severance taxes among the lowest in the region. Opponents argue the measure is a tax increase that, combined with an ongoing overhaul of Colorado's oil and gas regulations, will boost energy prices and hurt local economies. Denver political analyst Floyd Ciruli said Ritter is taking on a "huge interest group" that feels embattled and has made it clear it will fight back. "On his side he has this growing strength of the Democratic Party, large legislative majorities . . . and an empowered environmental community," Ciruli said. Lawmakers, environmentalists and other interest groups have been eyeing oil and gas revenue as drilling has expanded across the state. Colorado issued a record 6,368 permits last year and is on pace to exceed that this year. Amendment 58 would eliminate a tax credit that allows the industry to deduct most of what it pays in local property taxes from severance taxes it pays to the state. Severance taxes are paid on minerals "severed" from the ground; they can't be replaced. The 30-year-old property tax exemption is so substantial that companies operating in 25 of the state's 30 oil and gas-producing counties paid no severance tax in recent years. The amendment's supporters point to New Mexico and Wyoming, both big energy producers, which have permanent funds now swollen with billions of dollars in severance tax revenues. They argue those states will have something to show for the boom when the gas runs out. But companies say the tax credit helps even out disparate local property tax rates. They say without it, companies might pass over areas with high property taxes in favor of areas with lower taxes. Opponents have built their own broad coalition, which includes numerous chambers of commerce, rural county commissions and local school districts wary of losing property tax revenue from companies if they leave the area. They warn the industry's interest in Colorado could waver, resulting in job losses and declining state and local revenue. "Since when did raising tax create new jobs?" asked Meg Collins, president of the Colorado Oil and Gas Association. "It's awfully risky to raise taxes, particularly when it looks like the economy nationwide and in Colorado could be slipping toward a recession."