State gets shorted on royalties

Nickels and dimes add up to a $1.5M loss for year

Colorado again is getting shortchanged by the federal government on gas and oil royalties, and the nickels and dimes add up to a $1.5 million yearly loss for the state.

Montezuma County, with its carbon dioxide production on public lands, is one of the biggest losers among the state's local governments, with an estimated loss of $30,000 a year.

It's not much in the context of a multi-million-dollar budget, but it's real money.

“Obviously, every little bit helps,” said Montezuma County Manager Melissa Brunner.

The inequity comes from the budget deal passed by Congress this month to avoid another federal government shutdown. It preserves a 51 percent to 49 percent split in mineral royalties, which Congress first adopted in 2008. Western lawmakers have been trying to get back to the 50-50 split ever since.

The Associated Press reported the national cost to states as $415 million over the next decade.

Rep. Scott Tipton, R-Cortez, is a co-sponsor of a bill to allow states to collect their full 50 percent of royalties directly from energy companies. The federal government has been keeping the extra 1 percent as an administrative fee.

Sen. Mark Udall, D-Colo., signed on to the Senate version of that bill this month, and he said he remains committed to making sure energy-producing communities get their fair share.

“The bipartisan budget deal was not perfect – and not the compromise I would have written – but it prevents a destructive government shutdown and averts some of the catastrophic effects of yet another round of automatic budget cuts,” Udall said in an email.

Colorado would have had an extra $1.53 million this year and $1.56 million next year if the 50-50 split had been restored, but state officials were not counting on it, said Henry Sobanet, director of Gov. John Hickenlooper's budget office.

The state uses its mineral royalties to pay for public schools, college construction and water projects. It sends 40 cents on every dollar to local governments, either in grants or direct payments.

In 2011, Montezuma County and the towns of Cortez, Mancos and Dolores got nearly $3 million in direct payments. A 1 percent increase would have brought an extra $30,000 into the county.

It's a small but real effect that could pay for a portion of a new employee's salary and benefits.

“It's probably half to three-quarters of a person in a department somewhere. It goes a long way towards utilities and fuel,” Brunner said.

Other area governments get lower federal mineral payments. The 51-49 split cost La Plata County only about $5,000 in 2011, for example.

The budget deal was one of two developments last week that have some people feeling put out by federal gas and oil practices.

While Congress was dividing up the pie on royalties, the Government Accountability Office said the pie should be much bigger.

A GAO audit criticized the Department of the Interior for not taking action to change the royalties that companies pay to drill on federal land.

The U.S. government's 12.5 percent royalty rate is among the lowest in the world, the GAO found in a 2007 study. But the Interior Department has not done anything to change the rate, despite a series of critical reports that date back to 1969. The department did raise its offshore royalty rate to 18.75 percent since the GAO's 2007 report.

Gas and oil companies made $66 billion by drilling on public land in the 2012 budget year, according to the GAO. They paid about $10 billion in royalties to the federal government.