The Hickenlooper administration Tuesday said it will form a stakeholder group to review the way oil and gas production is taxed in Colorado.
The move — which is supported by some industry groups and lawmakers — comes after a legislative proposal to review severance taxes was filed last week.
The severance tax levied on Colorado minerals, oil and gas sales raised $175 million in 2013. The tax and its distribution formula was last revised in 2007.
“A lot has changed in the last seven years,” said state Sen. Gail Schwartz, D- Snowmass, a co-sponsor of the study bill. Schwartz withdrew the bill after the administration announced its plan.
In 2007, most of the drilling was on the Western Slope, and most of the production was gas. Drilling is now taking place on the Front Range, and it is producing oil.
State Sen. Mary Hodge, D-Brighton, the bill’s other sponsor, said the state’s severance tax, the lowest in the West, might be able to generate more money to be applied to statewide programs.
The tax revenues are split between the state and counties where there are oil and gas operations. Part of the state money goes to statewide water projects.
One reason the Colorado rates are low is because operators are able to take most of their local property taxes as a credit against the state tax. Most Front Range wells pay no state tax after three years because of production declines and the tax credit, according to one study.
“There are clearly issues that need to be discussed,” said Bob Randall, deputy director of the state Department of Natural Resources.
Colorado Petroleum Association president Stan Dempsey said his group, while opposing the bill, is ready “to discuss the subject in forums.”
Matt Samelson, an attorney with the Western Natural Resources Law Group, said a key will be whether the stakeholder group includes a wide variety of members.
“The creation of a stakeholder group is an opportunity to have a rational discussion on fiscal policy on a usually heated topic,” Samelson said.
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
