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Oil-And-Gas-Severance-Taxes-IP.Pdf Colorado Legislative Room 029 State Capitol, Denver, CO 80203-1784 (303) 866-3521 • FAX: 866-3855 • TDD: 866-3472 Council www.colorado.gov/lcs Staff E-mail: [email protected] M E M O R A N D U M October 8, 2013 TO: Interested Persons FROM: Marc Carey, Principal Economist, 303-866-4102 SUBJECT: Oil and Gas Severance Tax Information Summary This memorandum provides information about oil and gas severance taxes paid by producers in Colorado and other western states. First, county level estimates of severance taxes paid in Colorado on oil and natural gas production are provided for FY 2003-04 through FY 2012-13. Second, estimates of the value of the two primary tax benefits that Colorado producers receive are presented. Third, the difference between statutory and effective severance tax rates is defined and discussed. Estimated effective severance tax rates are presented for Colorado and eight other western states. In Colorado, oil and gas operators receive two tax benefits that reduce their severance tax liability: (1) an ad valorem property tax credit and (2) a stripper well severance tax exemption. This research estimates that the average annual value of the ad valorem credit and the stripper well exemption was $177 million and $89 million, respectively, over the last 10 years. Over this period, the value of the ad valorem credit ranged from $102 million to $262 million, while the value of the stripper well exemption ranged from $63 million to $135 million. The existence of tax benefits causes a divergence in the statutory and effective tax rates. While Colorado's statutory severance tax rate varies between 2 and 5 percent, this research estimates that the effective severance tax rate averaged 1.6 percent over the last 10 years, ranging from 0.4 percent to 2.4 percent. In FY 2010-11, Colorado's effective rate was estimated to be 1.5 percent, the lowest among the nine western states evaluated. Effective rates in other states ranged from 1.6 percent in Utah to 10.6 percent in North Dakota. Open records requirements: Pursuant to section 24-72-202 (6.5)(b), C.R.S., research memoranda and other final products of Legislative Council Staff are considered public records and subject to public inspection unless: a) the research is related to proposed or pending legislation; and b) the legislator requesting the research specifically asks that the research be permanently considered "work product" and not subject to public inspection. If you would like to designate this memorandum to be permanently considered "work product" not subject to public inspection, or if you think additional research is required and this is not a final product, please contact the Legislative Council Librarian at (303) 866-4011 within seven days of the date of the memorandum. This memorandum responds to your request for information related to the severance taxes that Colorado oil and gas producers pay to the state. Specifically, your requested information on: • oil and gas severance tax collections by county; • the value of the ad valorem property tax credit; • the value of the stripper well tax exemption; • the effective severance tax rate on Colorado producers; and • the effective severance tax rate on producers in other states. This memorandum addresses each of these topics in turn. Severance Tax Collections by County. Over the last 10 years, oil and gas severance tax collections have averaged $148.2 million, ranging from a high of $307.0 million in FY 2008-09 to $28.4 million in FY 2009-10. Based on Legislative Council Staff estimates, the top five counties for average oil and gas severance tax collections over this period in order were: La Plata, Garfield, Las Animas, Rio Blanco, and Weld. Table 1 provides estimated oil and gas severance tax collections during this 10-year period. -2- Table 1 Estimated County-Level Oil and Gas Severance Tax Collections FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 ADAMS $12,345 $66,257 $ - $ - $ - $6,810 $ - $ - $ - $ - ALAMOSA $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - ARAPAHOE $ - $2,238 $ - $1,631 $ - $789 $ - $1,283 $45,554 $53,604 ARCHULETA $71,971 $133,682 $447,630 $418,327 $576,326 $1,710,616 $251,351 $1,132,434 $961,112 $608,069 BACA $89,657 $91,754 $95,388 $16,625 $ - $40,708 $ - $ - $29,361 $59,738 BENT $ - $16,682 $22,391 $ - $ - $ - $ - $9,788 $6,330 $ - BOULDER $ - $43,521 $109,420 $ - $37,220 $67,357 $ - $37,398 $ - $2,333 BROOMFIELD $6,562 $5,732 $ - $ - $1,853 $108,026 $ - $42,851 $62,463 $ - CHAFFEE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - CHEYENNE $150,799 $167,872 $210,053 $64,595 $61 $73,697 $ - $ - $580,038 $229,212 CLEAR CREEK $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - CONEJOS $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - COSTILLA $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - CROWLEY $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - CUSTER $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - DELTA $ - $3,678 $99,932 $7,072 $ - $ - $ - $ - $158 $3,396 DENVER $19,319 $16,723 $11,960 $6,412 $66,988 $60,490 $9,609 $50,210 $28,323 $21,810 DOLORES $ - $26,796 $113,923 $107,361 $13,272 $15,078 $ - $ - $23,177 $27,313 DOUGLAS $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - EAGLE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - ELBERT $4,892 $ - $ - $41 $ - $ - $ - $ - $ - $ - EL PASO $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - FREMONT $ - $ - $14,126 $14,567 $ - $ - $ - $182,809 $255,818 $ - GARFIELD $15,381,831 $28,350,180 $53,873,807 $27,141,137 $34,823,856 $117,867,176 $6,235,564 $23,777,137 $71,503,774 $20,837,414 GILPIN $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -3- Table 1 (Cont.) Estimated County-Level Oil and Gas Severance Tax Collections FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 GRAND $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - GUNNISON $ - $ - $ - $67,142 $202,202 $355,479 $17,364 $102,333 $217,581 $ - HINSDALE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - HUERFANO $216,279 $215,927 $316,901 $165,104 $209,276 $ - $ - $ - $44,575 $43,293 JACKSON $ - $ - $1,114 $2,702 $12,869 $113,454 $7,874 $4,645 $144,833 $2,121 JEFFERSON $ - $ - $ - $ - $ - $1,627 $319 $ - $924 $2,189 KIOWA $ - $9,106 $ - $ - $ - $ - $ - $ - $35,734 $ - KIT CARSON $40,629 $32,616 $64,513 $32,428 $ - $ - $29 $ - $ - $ - LAKE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - LA PLATA $78,184,168 $79,853,212 $125,218,801 $70,109,097 $81,633,512 $128,291,637 $18,618,923 $88,729,748 $67,426,646 $52,692,300 LARIMER $1 $196 $ - $364 $4,235 $63,422 $ - $ - $62,684 $3,549 LAS ANIMAS $7,216,151 $8,946,236 $13,397,262 $8,441,800 $10,291,292 $24,667,988 $1,363,127 $5,534,309 $10,302,036 $5,306,986 LINCOLN $ - $ - $ - $ - $ - $ - $ - $11,089 $ - $50 LOGAN $ - $25 $13,929 $311 $18,047 $3,191 $ - $18,808 $10,442 $ - MESA $646,243 $681,637 $1,746,322 $1,200,451 $2,695,458 $7,477,040 $ - $44,475 $2,509,680 $ - MINERAL $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - MOFFAT $3,290 $1,590,623 $1,419,798 $ - $ - $1,694,363 $ - $ - $720,409 $162,843 MONTEZUMA $7,757 $81,933 $52,214 $ - $ - $11,253 $8,268 $ - $153,075 $62,118 MONTROSE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - MORGAN $5,989 $12,794 $15,009 $ - $ - $ - $ - $ - $18,740 $26,057 OTERO $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - OURAY $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - PARK $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - -4- Table 1 (Cont.) Estimated County-Level Oil and Gas Severance Tax Collections FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 PHILLIPS $ - $ - $97,053 $53,723 $ - $275,863 $ - $ - $34,264 $ - PITKIN $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - PROWERS $ - $ - $81,161 $78,049 $ - $118,151 $2,754 $ - $22,929 $ - PUEBLO $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - RIO BLANCO $3,384,648 $4,593,049 $8,751,645 $5,134,138 $7,636,059 $14,147,244 $1,893,531 $11,268,628 $16,119,889 $12,123,782 RIO GRANDE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - ROUTT $1,400 $1,738 $57,093 $27,737 $4,155 $7,027 $ - $15 $40,085 $ - SAGUACHE $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - SAN JUAN $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - SAN MUGUEL $3,240,937 $3,385,492 $4,206,035 $2,592,566 $1,087,877 $2,573,124 $136 $ - $755,894 $386,696 SEDWICK $ - $8,176 $24,090 $ - $ - $ - $ - $615 $ - $ - SUMMIT $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - TELLER $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - WASHINGTON $ - $10,864 $43,025 $4,650 $ - $ - $ - $629 $21,982 $4,549 WELD $1,488,427 $3,622,924 $ - $ - $409,805 $5,977,944 $ - $ - $14,486,142 $25,609,273 YUMA $208,574 $343,459 $739,925 $893,348 $186,353 $1,273,950 $ - $ - $507,558 $ - TOTAL $110,381,868 $132,315,123 $211,244,521 $116,581,375 $139,910,717 $307,003,505 $28,408,847 $130,949,204 $187,132,214 $118,268,697 -5- The Department of Revenue collects information on statewide oil and gas severance tax collections; it does not differentiate these collections by mineral or by the location where the production occurred. The Colorado Oil and Gas Conservation Commission (COGCC), however, does maintain county-level production data for both oil and natural gas, at the wellhead level. It is therefore possible to estimate county-level severance tax collections for both oil and natural gas by combining these production data with historical price data and county-level data on the historical assessed value of production and average mill levies. Legislative Council Staff maintains a forecasting model that uses these data to estimate county-level oil and gas severance tax collections. It is important to recognize that these estimates are not actual collections. Statewide aggregate estimated totals are calibrated to actual collections as they are reported at the end of the fiscal year on an accrual accounting basis. Table 1 contains county-level estimates from the model. Value of Ad Valorem Tax Credit. Each year Colorado operators are allowed a tax credit equal to 87.5 percent of the property taxes paid or assessed on the prior year's oil or natural gas production as an offset to their current year's severance tax liability.
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