Mining News-While posting huge profits, new report shows oil, gas, mining companies pay a lower tax rate than the average Coloradan

Durango, CO, 04/15: A new report shows that Colorado taxpayers are paying more in taxes than the oil and gas companies producing in the state — even as these companies post enormous profits. Colorado taxpayers are paying 4.63% in tax, while the companies that are charging record prices at the pump and in our homes are paying 2% in combined state income and severance taxes. In 2007, British Petroleum, one of the major oil producers in Colorado, reported $20 billion profits. Governor Ritter’s 2008 Colorado state budget proposal is only $18 billion.

Gwen Lachelt, director of the Oil & Gas Accountability Project (OGAP), said, “this tax day, as Coloradans dig deep to pay for the services we all need, it borders on the criminal that multibillion dollar companies are paying a lower tax rate than those struggling with the increased gas prices charged by those same companies.” She continued, “it’s especially ridiculous when you consider that one company operating in Colorado — British Petroleum — declared more 2007 profits than the entire 2008 Colorado state budget proposal.”

The report Mining Taxes in Ten Western States, prepared by Dr. Robert Ginsburg from the Center on Work and Community Development, analyzes state mining taxation around the west by applying five standard economic principles of fiscal extraction policy. Using these standards, the report finds current taxes in the ten states, Alaska, Arizona, Colorado, Montana, Nevada, New Mexico, North Dakota, South Dakota, Utah and Wyoming, are insufficient and in need of reform.

The five principles are:

Be fair in assessing tax burden on companies and efficient in minimizing the impact on important production and investment decisions;
Be responsive to growth in the industry;
Generate stable and consistent revenues;
Be transparent and accountable to reduce error and instill public confidence; and
Generate sufficient revenue to compensate the state for any operational impacts and to allow the state to have sufficient revenue in reserve when the commodity is completely removed.
A core principle of mining taxation, as explained in the report, is the recognition that the taxation must recognize the one-time nature of the industry. Once the mineral has been removed, the industry will leave, leaving state and local governments with the increased needs of an economically bust community, as well as a loss of tax revenue. A fair tax system will utilize boom period revenues to prepare for this inevitable downturn. Such sovereign or permanent wealth funds are common in many oil, gas, and mining dependent countries. In the western United States, Alaska has such a fund for oil and gas revenue, but it does not apply to mining, and no other state has any such fund.

For More Information
Mining Taxes in Ten Western States
Gwen Lachelt, Oil & Gas Accountability Project, 970-759-4387
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