There’s been a
steep falloff in friendly chitchat around the local gas pumps, and
no wonder. With diesel at $3.40 a gallon and gasoline only somewhat
cheaper, it’s common to see someone drop $100 on a tankfull.
A typical American family will spend more than $3,000 on
liquid fuels this year, and another two grand on electricity and
natural gas. Lodgepole pine is $250 a cord, which seems pricey, but
is much cheaper than the profane price I’m paying for
propane.
The hemorrhaging of family energy budgets is
infusing billions into the ledgers of Shell, BP, Exxon, Anadarko,
Williams, Chevron, and EnCana, the large multinationals that now
dominate natural gas production in the Rockies. Next year, the
combined global profits of those seven companies will approach $100
billion.
If there’s a silver lining here,
it’s that some state governments’ severance tax
collections are also rising. Severance taxes are designed to
capture some of the wealth that is lost when non-renewable natural
resources are extracted from the earth. Wyoming and New Mexico, two
states where gas drilling has boomed over the past decade, now
boast billions of dollars in their severance tax funds.
But my “progressive” state of Colorado, the
fastest-growing gas producer in the nation, we continue to play the
rube when it comes to severance taxes. Coloradans are a smug bunch.
We don’t think of Wyoming as the state that makes energy
extractors pay their fair share, we think of it as the Tetons, half
a million antelope, and a bunch of rednecks. But if energy is an IQ
test for Americans, we’re the dumb ones.
Although
Colorado’s nominal severance tax rate is 5 percent, the state
collects less than 2 percent, because we allow energy companies to
deduct the county property taxes they pay from their severance tax
bill, and because three-fourths of the state’s wells pay no
severance tax at all due to Colorado’s “stripper
well” exemption. This provision made sense when oil was $15
per barrel and natural gas was $1 per thousand cubic-feet. Since
1999, these prices have soared. Today, oil prices are above $90 and
natural gas trades at $6.
By piggybacking the property
tax and stripper-well exemptions together, oil companies have
worked the Colorado tax code like a broken slot machine. The poster
child is Weld County in the northeastern part of the state, where
producers extracted $7 billion of oil and gas between 2002 and
2006. In three of those years, Colorado collected not one dollar in
severance taxes in Weld County.
The upshot is that since
2002, Colorado has left $1.3 billion on the table, even as the
state has struggled to meet its bligations for higher education,
health care and roads. In Colorado, we aren’t giving it away;
we pay them to take it.
I have nothing against natural
gas. It is the planet’s finest fossil fuel. I admire the
roughnecks who work grueling 12-hour shifts on the drilling rigs.
From a geotechnical perspective, the wizardry being deployed in the
Rockies is a marvel. My friend Charlie’s job is to dowse an
eight-foot-thick oil seam a mile underground, then thread a
drilling bit along it, horizontally, for a mile. This makes heart
surgery look like child play.
When it comes to politics,
though, the petroleum industry is a playground bully. Recently, one
industry-funded propaganda outfit, Americans for American Energy,
accused eight mayors in western Colorado of aiding and abetting
Osama bin Laden by opposing natural gas drilling on the Roan
Plateau, a rare wilderness highland. Since 1990, the petroleum
industry has drilled more than 150,000 wells in the Rockies and
leased — in what historians may dub the Cheney Giveaway
— 30 million acres of federal land. That’s the
equivalent of 15 Yellowstones, yet the industry’s henchmen
continue to whine about what they call unreasonable limits to
access.
They also avoid any discussion of severance
taxes. When Colorado Rep. Kathleen Curry recently proposed hiking
our severance tax rate so that it would be equal to
Wyoming’s, oil and gas companies suggested they might leave
the state.
This is a well-worn — and empty — bluff that
Colorado legislators should call. The Rockies are the only place in
North America where gas production is increasing. Colorado’s
gas production has increased fivefold since 1990, and adjusting our
severance taxes wouldn’t slow the rush a bit.
The
current gas boom won’t last forever, and we should not
squander the opportunity to reap long-term benefit. Wise public
policy recognizes that fossil fuels are nonrenewable, and that the
citizens of Colorado and other states have a legitimate claim to a
fair share of their state’s mineral bounty. Legislators
should also ensure that some portion of that wealth is saved for
future generations, who are likely to look back at the current
bonfire and wonder what we were thinking.
Randy
Udall is a contributor to Writers on the Range, a service of
High Country News (hcn.org). He lives in
Carbondale, Colorado, where for 13 years he directed the Community
Office for Resource Efficiency, a nonprofit organization that
partners with local governments and utilities to promote efficient
and renewable energy.
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