WHEREAS Western Colorado’s energy industries thrive best under stable, predictable tax regimes, carefully balancing market-forces and incentives; and
WHEREAS changes in tax and incentive policies have impacts on energy development, jobs, and the sustainability of Western Colorado’s energy industries; and
WHEREAS Energy and Mineral development activities in Colorado occur primarily in Western Colorado and The Colorado Department of Local Affairs distributes revenue derived from energy and mineral extraction statewide. These revenues come from State Severance Tax receipts and Federal Mineral Lease non-bonus payments; and
WHEREAS history repeatedly demonstrates the cyclical nature of both mineral development and their attendant revenues, with the need to retain and invest a portion of these revenues during boom periods to be available for Energy Impact Assistance for both the front-end investments during upturns in energy and mineral development to help mitigate the adverse fiscal impacts and revenue shortfalls occur during downturns; and
WHEREAS the purpose of the Energy and Mineral Impact Assistance Program is to assist political subdivisions that are socially and/or economically impacted by the development, processing, or energy conversion of minerals and mineral fuels. Funds come from the state severance tax on energy and mineral production and from a portion of the state’s share of royalties paid to the federal government for mining and drilling of minerals and mineral fuels on federally owned land. The program was created by the legislature in 1977; and
WHEREAS by statute, severance tax revenues are split evenly between the Department of Natural Resources (DNR) and the Department of Local Affairs (DOLA) with half of the DNR half deposited into the Operational Account and used for programs in the Department of Natural Resources that provide for the sound management of mineral, mineral fuel, and water resources, and the other half of this half deposited into the Perpetual Account, which provides loans for water projects; and with 70% of the DOLA half dedicated to local impact/grant funds and the other 30% allocated to direct distributions to local governments; and
WHEREAS local governments are responsible for the infrastructure and services to support public land energy development activities and related population growth (i.e., highways, roads, schools, water and sewer, police and fire protection, etc.); these communities struggle with inadequate funding to meet this responsibility; and proposals or policy decisions at the state level can make it difficult to effectively budget for these responsibilities long-term; and
WHEREAS in the past, the General Assembly has looked to the State’s share of severance tax revenues to supplement the General Fund when facing shortfalls.
WHEREAS production of minerals including, oil, and natural gas, and coal on federal lands is authorized under the Mineral Lands Leasing Act of 1920 (as amended). Through that act, each state receives a portion of the revenue from leasing activity. The State of Colorado distributes a portion of those revenues to local governments impacted by the mineral leasing development activities; and
WHEREAS many local governments receive payments for non-taxable federal land, and production of materials on that land. The income that local governments receive from these revenues can be substantial and impacts the calculation of the Department of Interior’s Payment in Lieu of Taxes value for each qualifying entity; and
WHEREAS counties are allowed to create a new “Federal Mineral Lease District”. In the case where a county creates such a district, The Department of Local Affairs is required to forward the Direct Distribution Payment that would have otherwise gone to the county, to the FML District; and
WHEREAS local governments are responsible for the infrastructure and services to support these public land energy development activities and related population growth (i.e., highways, roads, schools, water and sewer, police and fire protection, etc.), and these communities struggle with inadequate funds to effectively meet this responsibility; and
WHEREAS there are huge deficits for the Federal government and without notice or hearings, Congress reduced the historical state share of Federal Mineral Lease royalties; and
NOW THEREFORE, BE IT RESOLVED that Club 20 supports:
- The continued dedication and increased distribution of Federal Mineral Leasing royalties and State Severance Taxes to be returned to the source communities from whence the minerals were developed to help mitigate the adverse impacts associated with the development of those minerals; and
- The establishment of a reserve from severance taxes for the Department of Natural Resources Operating Fund; however, it opposes any attempt by the Joint Budget Committee to redirect revenues from Severance Tax collections to the General Fund; and
BE IT FURTHER RESOLVED that Club 20 supports:
- The continued dedication and increased distribution of Federal Mineral Leasing royalties and State Severance Taxes to be returned to the source communities from whence the minerals were developed to help mitigate the adverse impacts associated with the development of those minerals; and
- The historic distribution of Federal Mineral Lease (FML) payments which provides for a 50:50 split between the federal government and the states of origin; and
- Supports the Congressional priority established that the states’ share of these FML revenues shall be used for the source communities impacted by the development of these resources; and
- The position to urge Congress to eliminate the two percent administrative fee under the Mineral Leasing Act and restore the royalty structure under the Mineral Leasing Act back to an equal split between the federal government and the states of origin; and
- The position that any proposals involving Energy Impact Funds should be developed in full consultation with West Slope legislators, community leaders and mineral industry representatives who stand to be adversely affected by such proposals. Any proposals that would impact payments to local governments should be developed in full consultation with those West Slope communities; and
- The establishment of a reserve from severance taxes for the Department of Natural Resources Operating Fund; however, it opposes any attempt by the Joint Budget Committee to redirect revenues from Severance Tax collections to the General Fund; and
- The position that any funds taken from the Severance Tax Fund shall be restored in their entirety, when said funds are available.
FURTHER BE IT RESOLVED that Club 20 opposes:
- Changes in federal and state taxing policies that erode the competitiveness of Western Colorado’s energy sectors in relation to other regions, states, or foreign energy assets; and
- The redirection of Federal Mineral Leasing Payments away from the impacted communities for any reason.
Adopted 9/7/2023
Incorporates the Following Resolutions:
- EN-02-1: Severance Tax Revenues, Oppose Redirecting
- EN-91-1: Federal Mineral Leasing Payments
- EN-09-1: Taxes on Western Colorado’s Energy Industries
- EN-06-1: Energy Impact Funds, Dedicating to Source Communities