| Gas and oil are taxed by both federal and state agencies. A bill currently in the state senate would bring 25 percent of state taxes on oil and gas back to the counties that support the industry. Counties already receive a porton of federal tax dollars from mineral leases distributed through the Community Impact Board. While mineral leases include coal, oil, gas and other hydrocarbons, sulphur, phosphate, potassium and sodium, the state-imposed severance tax only taxes petroleum and natural gas industries. |
Southeastern Utah Association of Local Governments officials met Feb. 17 and voted to support a bill before the Utah Senate that would bring tax monies from oil and natural gas extraction back to local governments.
Members of the Uintah Basin Association of Governments came to the meeting urging SEUAOG members to extend support to Senate Bill 63.
SB-63 is sponsored by Sen. Beverly Ann Evans who represents Daggett, Duchesne, Uintah and Wasatch counties and part of Summit County.
The bill amends the oil and gas severance tax to bring 25 percent of the revenue back to local governments.
Two existing funds from the severance tax, the Uintah Basin revitalization fund and the Navajo revitalization fund, would be protected.
The current bill calculates the 25 percent after the first revitalization funds are taken out.
“If oil is under $13 a barrel, there’s a 3 percent severance that is charged on that. When it goes above $13 a barrel, then it’s 5 percent. On [natural gas] if the price is over $1.50 for [1,000 cubic feet], it’s 5 percent. If it’s under $1.50, then it’s 3 percent. This money all goes into the state,” said Mike McKee, a commissioner from Uintah County and proponent of the bill.
“The problem we’ve been having out in rural areas is there’s a lot of infrastructure – there’s a tremendous amount of resources that it takes to give the support to the industry to get the resources out,” continued McKee. “In rural Utah, a lot of our money from resources has traveled out into the Wasatch Front. If we could have some means to try and keep some of it home locally, we believe there’s some value in doing that.”
McKee explained that, last year, the state collected $42.6 million in severance taxes.
The proposed bill would go into effect on Jan. 1, 2006, with the first payment to county governments from the state tax commission sometime after July 1, 2006.
Fiscal projections suggest that approximately $5.5 million would be diverted in 2006, and $11 million each year beginning in 2007.
“There is simply a diversion of 25 percent of what is generated out of a state-imposed tax on an industry, where local governments bear the responsibility of making sure that industry is able to compete and achieve and have available to it the things that it needs in order to be competitive,” said Mark Walsh, a lobbyist for the bill.
“It works on the same principal as mineral lease. Congress recognizes that local communities bear the responsibility of helping to generate that money. We believe that the state, by sharing the severance revenues, will also now engage in recognizing that local communities bear that responsibility,” added Walsh .
“We ran a bill about three years ago that had a somewhat more complicated formula. It had thresholds that had to be achieved before local areas were able to receive any of the money from the severance. This bill does not have thresholds attached to it,” said Walsh.
The bill introduced three years ago also allowed for a local option to add additional taxes or surcharges, whereas the current proposal does not.
“We’re not in favor of this severance tax. We wish it wasn’t there. But we’ve been assured that it’s going to be there. It taxes an industry that’s in our counties, and it taxes an industry that’s in your counties. We feel very strongly that some of that money that’s derived from this severance tax should be returned to the counties of origin to support that industry,” said Rod Harrison, a commissioner from Duchesne County.
“We hope that some of the other counties would jump on board with us, and see the benefit of this. It’s a very straightforward bill. We definitely don’t want any severance on coal. If that were to come up as a rider on this bill, we’d drop the bill.”
“We have met with Gov. Huntsman, and gone through this bill with him. He is supportive. We have the assurance that if this bill passes, he will sign it into law,” said Walsh.
The bill would affect nine counties, with seven counties receiving most of the money generated. The bill is presently before the senate revenue and taxation committee. Sen. Mike Dmitrich, who sits on the committee, moved to pass the bill out of committee last Friday with a favorable recommendation, but unable to receive a second, the committee voted to adjourn. Dmitrich was unsuccessful in his vote against adjournment, and the bill remains in the committee, but is not on today’s agenda.