American Oil and Gas Reporter - April 2019 - 128

TABLE 1
Fiscal Source

Total Fiscal Flows from Oil and Gas to Various Colorado Governments
Amount (million $)
Period
Primary Uses

Individual Income Taxes
State Lands & Minerals
Federal Lands & Minerals
Property Taxes
State Severance Taxes
Oil & Gas Conservation and Environmental
Response Fund
Corporate Income Taxes
TOTAL:

thirds of that output attributable to extraction, drilling and support activities.
The report shows that in 2017, 29,904
people were directly employed or worked
as sole proprietors in Colorado extraction,
drilling, support activities, and pipeline
construction and transportation. Supply
chain positions in establishments outside
the narrowly-classified upstream and midstream sectors added 8,661 indirect jobs,
while expenditures of earnings by Colorado's upstream and midstream workforce
added 50,775 positions, bringing total
direct, indirect and induced employment
to 89,340, the report adds.
The report estimates total workforce
earnings associated with the upstream
and midstream sectors at $10.8 billion in
2017. It says workers in the extraction
industries averaged the highest incomes
at $151,000, followed by pipeline transportation workers at $135,000, drilling
and support activity at $88,000 and
pipeline construction at $69,000.
Public Revenue Streams
The 89,000 jobs associated with Colorado oil and gas activity accounted for
$234.7 million in state individual income
taxes, Economic and Fiscal Contributions
calculates. "Various taxes and fees on oil
and natural gas activity produce at least
seven distinct streams of public revenue
in Colorado," the report states.
It estimates those revenue streams
amounted to $993.3 million in 2017
(Table 1), led by county property taxes at
$457.1 million. Other sources of revenue
from Colorado's oil and gas industry are:
· State lease bonus and land lease
payments, surface use fees and royalties;
· Federal lease bonus and land lease
payments, surface use fees and royalties;
· State severance taxes;
· A levy to fund oil and gas regulation;
and
· State corporate income taxes.
"Much of the public financial impact
of the industry flows to education and
social assistance programs in the state,"
the report observes.
For example, the report outlines, in

$234.7
$99.4
$84.7
$457.1
$96.1

2017
FY 2017-18
2017
2017
FY 2017-18

Education, Social Assistance
Education, Parks & Wildlife, Public Buildings
Education, Social Assistance
Education, Local Governments
Local Impact Grants, Energy Innovation, Water & Resources

$13.2

FY 2016-17

Oil & Gas Regulation

$8.1
$993.3

2017

Education, Social Assistance

addition to the 41.8 percent of the state
general fund-into which individual income
taxes flow-that is allocated to education,
fees associated with oil and gas extraction
on state lands are managed by the State
Board of Land Commissioners, which
manages several trusts for the benefit of
public schools and a variety of other
public institutions and purposes.
Among trusts receiving oil and gas
related fees are the School Trust (for
public schools), the CSU Trust (for Colorado State University), the Internal Improvement Trust (for Colorado parks and
wildlife) and the Public Buildings Trust.
"In the case of the School Trust, oil
and gas revenues have covered between
80 and 95 percent of trust distributions
over the past eight fiscal years," Economic and Fiscal Contributions states.
"Oil and gas revenues have covered between 84 and 127 percent of CSU Trust
fund distributions."
Severance, Other Taxes
Severance tax revenues go primarily
to the Colorado Department of Natural
Resources, where they are used to manage Colorado's 42 state parks and more
than 300 state wildlife areas, the report
goes on. In addition, severance tax revenues are used to make essential infrastructure investments to promote conservation of Colorado's water resources
and to safeguard water quality, the
report says.
"Colorado severance taxes are allocated
to a variety of energy, resource and local
uses," the report details. "By statute, the
first $1.5 million flows to the Innovative
Energy Fund. The remaining severance
tax revenues are split evenly between the
Department of Natural Resources Severance Tax Trust Fund and the Department
of Local Affairs Local Government Severance Tax Fund."
The former allocates funds to natural
resource and energy related programs,
and water and other capital projects.
The latter allocates about 70 percent to
local impact grants and loans with the
remaining 30 percent distributed to local

128 THE AMERICAN OIL & GAS REPORTER

governments in proportion to local oil
and gas activity.
The report reveals that Colorado collected $96.1 million in oil and gas severance tax revenues in fiscal 2017-18, and
the state's severance tax receipts averaged
$136.1 million a year during the past
five fiscal years.
But while revenues from oil and gas
activity are spread across myriad areas,
"Perhaps their greatest impact is felt by
K-12 education," the report asserts. "Colorado's BEST (Building Excellent
Schools Today) program serves school
children in the neediest parts of the state
using revenue generated from oil and
gas. The program gets $100 million annually from lease payments made to the
State Land Board."
Fees associated with oil and gas extraction on federal lands in Colorado
are administered by the U.S. Department
of Interior Office of Natural Resources
Revenue, and approximately half are returned to the state. The report shows
that total federal mineral lease revenue
from Colorado in 2017 was $169.4 million, of which the state should receive
$84.7 million.
"In the decade ending 2017, total federal lands oil and gas fees in Colorado
ranged from $347.0 million in 2008 to
$147.8 million in 2016," the report says.
The report estimates $457.1 million
in property tax payments were due various
taxing authorities in 2018 associated with
2017 assessed value of oil and gas properties and equipment. And, "Given higher
average crude oil prices in 2018 compared
with 2017, we expect property taxes due
in 2019 to exceed this 2018 estimate,"
the report states.
It points out that the assessment rate
on oil and gas lands is 75.0-87.5 percent
of value, compared with the 29.0 percent
general assessment rate for corporate
property. "And unlike other industries,
oil and natural gas extraction establishments pay royalties and taxes on
the value of production, in addition to
taxes paid on earnings," the report says.
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American Oil and Gas Reporter - April 2019

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