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So Much Tax Money, So Many Ways to Spend It February 18, 2008

Posted by awatcher in Uncategorized.
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There is a gusher of tax money awaiting those who can figure out how to tap and spend it, and the environmentalists are working over time to lay claim to it.

We have written earlier about the severance tax and how it could grow to unimaginable sums of money if and when the oil companies figure out how to recover one million barrels of oil per acre from oil shale lands.

The environmentalist extremists have set their sights on that money and the power it would bring if only they could control it.  The Aspen Times reports:

Environmentalists introduced four ballot proposals Thursday to increase the taxes paid by the oil and gas industry as they seek to build support for a statewide campaign.

The move comes as state lawmakers and the governor are still considering whether to ask voters to increase the state’s severance tax this year.

The coalition, which includes Trout Unlimited, Environmental Defense, The Wilderness Society and others, wants to use the estimated $200 to $300 million the proposed hikes could generate to boost renewable energy, protect wildlife habitat and help communities impacted by the boom. Joe Neuhof, West Slope field director for the Colorado Environmental Coalition, said some coalition members have been involved in the Capitol discussions about whether to raise Colorado’s tax — the second-lowest in the West — but wanted to put forward their priorities for how the money should be spent as they continue to talk.

These people aren’t thinking small:

The four ballot proposals include different combinations of getting rid of the current tax exemption for small wells, adding an extra 3 percent tax for all oil and gas wells and setting a new 10 percent tax rate for wells that produce more than $300,000 a year. Some would also bar energy companies from deducting their property tax in calculating the severance tax they owe.

One of the more likely goals of imposing a 10% severance tax is to slow down or even stop oil and gas development in the state.  Oil shale recovery has been delayed in part because of technology, but also because the proposed technology is so expensive.  If the environmentalists could add an extra 10% to the costs of recovery, they might be able to make it impossible to recover oil shale economically until the price of a barrel of oil hit $150.

In addition, by putting a dollar threshold at which taxes begin to be collected, they can depress the production of working wells.   As the price of oil and gas inevitably rise, every well will hit that threshold, but the owners will want to curtail production to avoid the tax.

This just follows the usual pattern.  If there is to be a tax increase, wouldn’t it be better if the proceeds went to more normal government activities such as funding higher education, building prisons, or building and maintaining roads? 

Imagine An Oil Gusher January 6, 2008

Posted by awatcher in Uncategorized.
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If one reads between the lines of a Durango Herald story, it is entirely possible that Colorado and Utah will be the beneficiaries of severance tax revenues beyond imagination if shale oil production comes on line.

The article talks about being able to produce one million barrels of oil per acre.  At today’s relatively low prices, that is $100 million dollars of production an acre.

In an effort to scoff at the level of production that can be reached, Randy Udall, Mark Udall’s brother seems to acknowledge that production could be 100,000 barrels a day.  Environmentalists always seem to grossly under estimate potential energy production, usually by a factor of 20, so assume 2 million barrels of oil a day.

Figure severance taxes to be somewhere in the neighborhood of $8 million a day and ramping up as the price of oil ramps up.

Does anyone really think that Colorado and the nation will not develop this oil?