Colorado Capitol Report

In this Capitol Report:

• Bill to Prioritize Public Health, Safety and Environment over Oil-and-Gas Production Dies in Senate Committee
• CACI Tax Council Gets Educated on Colorado Severance Tax System
• CACI's Legislative Agenda

Bill to Prioritize Public Health, Safety and Environment over Oil-and-Gas Production Dies in Senate Committee

Once again, the House proposes and the Senate disposes.

On Wednesday in the Senate, two minority Democrats joined six majority Republicans on the Senate Agriculture, Natural Resources and Energy Committee to ice a House bill to radically alter state policy to emphasize public health, safety and the environment at the expense of oil-and-gas production.

The two Democrats were Senators Leroy Garcia (Pueblo) and Kerry Donovan (Vail).

The CACI Energy and Environment Council opposed the measure, and CACI lobbied for its defeat.

Current policy by the state’s regulatory body, the Colorado Oil and Gas Conservation Commission, is to balance the two ends of this public policy teeter-totter.  The mission of the COGCC is stated on its web site:

The Colorado Oil and Gas Conservation Commission (COGCC) is charged with fostering the responsible development of Colorado’s oil and gas natural resources in a manner consistent with the protection of public health, safety, and welfare, including the environment and wildlife resources. Our agency seeks to serve, solicit participation from, and maintain working relationships with all those having an interest in Colorado’s oil and gas natural resources.

HB-1071 would have essentially put into state statute the ruling of the Colorado Court of Appeals in the Martinez case, which is now pending before the Colorado Supreme Court.

Here’s the legislative summary of HB-1071, which was not amended in the House:

HB-1071  “Concerning the regulation of oil and gas operations in a manner consistent with the protection of public safety.”

Current law declares that it is in the public interest to ‘[f]oster the responsible, balanced development, production, and utilization of the natural resources of oil and gas in the state of Colorado in a manner consistent with protection of public health, safety, and welfare, including protection of the environment and wildlife resources’. The Colorado court of appeals, in Martinez v. Colo. Oil & Gas Conservation Comm’n , 2017 COA 37, has construed this language to mean that oil and gas development is not balanced with the protection of public health, safety, and welfare, including protection of the environment and wildlife resources. Rather, that development must occur in a manner consistent with such protection.

The bill’s Fiscal Note offered a more detailed analysis of HB-1071.

The significance of the Martinez case–which the Colorado Supreme Court agreed on January 29^th to hear–to not only the oil-and-gas industry but the entire state economy cannot be understated.  If the ruling by the Colorado court of Appeals in the Martinez case is upheld by the Colorado Supreme Court, decisions by the state’s regulatory body over the industry would very likely be mired in litigation, which could bring new production to a screeching halt.

HB-1071 was passed by the Democrat-controlled House over the opposition of two Democrats and all minority Republicans.

The Senate sponsor was Senator Dominick Moreno (D-Commerce City).  HB-1071 was sponsored in the House by Representative Joe Salazar (D-Thornton), who is running for the Democrat nomination for Colorado Attorney General.  Representative Salazar is term-limited.

For more information about HB-1071 and other bills targeting the oil-and-gas industry, contact Bill Skewes, CACI Contract Lobbyist.

For more information on HB-1071 and news media coverage of the bill, read:

“Fracking bills die predictable deaths in Colorado House, Senate,” by Joey Bunch, Colorado Politics, March 8^th.

“Colorado Senate kills bill to rewrite state policy on oil and gas,” Cathy Proctor, The Denver Business Journal, March 7^th.

“Colorado lawmakers kill bill to require protecting the environment and people as oil and gas production move closer,” by Bruce Finley, The Denver Post, March 7^th.

“Senate Committee Sets Date for Hearing on Bill Seeking to Codify State Appeals Court Ruling on Martinez Case before Colorado Supreme Court Can Rule,” CACI Colorado Capitol Report, February 23^rd.

CACI Tax Council Gets Educated on Colorado Severance Tax System

Travis Holland, Anadarko and Rhonda Sparlin, RubinBrown

During the CACI Tax Council meeting held today, the Council had the opportunity to hear a presentation by Travis Holland, Senior Tax Accountant for Anadarko Petroleum.  Mr. Holland shared an overview of the current severance tax system in Colorado including details on the interplay between the ad valorum tax and the severance tax, the calculation and rates of both taxes and how they are assessed on the oil and gas industry in Colorado.  Mr. Holland also spoke about the challenges of the current severance system and the industry’s discussions with the Office of the Governor on potential opportunities for improvements to the system.

In addition to this presentation, the Council discussed the notice received by CACI and Tax Council members last week from the Colorado Department of Revenue stating that it plans to rescind all revenue bulletins.  The DOR staff shared with CACI staff that the intent of this decision was to formalize guidance they’ve been giving to taxpayers for years that the publications should not be relied upon and that the Department no longer regards the bulletins as binding.  The bulletins were issued from 1982-1992 and some were revised in 1999.

Finally, the Tax Council discussed 2018 tax related legislation including a bill addressing a long-term severance tax solution (HB 1201).  The Council took a position of SUPPORT on House Bill 1201 with a caveat that the bill be amended to reflect an earlier effective date.  Details regarding this piece of legislation and others discussed are provided below:

HB 1185 by Rep. Kraft-Tharp & Senator Neville – Market based sourcing for business income tax apportionment

CACI Position:  SUPPORT,

Background:  Under current law, income from the sale of services and intangible property is apportioned based on where the income-producing activity is performed. This bill changes the sourcing rules so that the income is apportioned based on where the income-producing activity is used or delivered.

Status:  Passed in the House Finance Committee on February 28^th and scheduled for House Appropriations Committee.  CACI’s Loren Furman testified in support of the bill along with Bruce Nelson, a member of CACI Tax Council.

HB 1201 by Rep. Thurlow & Senator Coram – Severance Tax Voter Approved Revenue Change

CACI Position:  SUPPORT with Amendment

Background:  Requires a referred measure for this November election allowing the state to retain and spend an amount equal to state severance tax revenue.  This is only when the State would otherwise be required to make a TABOR refund, and conditioned on State not:

• • Repealing or reducing any of the existing severance tax exemptions or credits; or
  • Reducing the percentage of the severance tax revenue that is allocated to local governments.

Status:  Scheduled to be heard in House Finance on April 9^th.

HB 1022 by Rep. Kraft-Tharp & Senator Neville – DOR Sales Tax Request for Information

CACI Position:  SUPPORT

Background:  Requires DOR to issue an RFI for an electronic sales and use tax simplification system that the state or any local government that levies a sales or use tax, including a home rule municipality and county, could use for administrative simplification on state and local sales and use taxes.

Status:  Signed by the Governor on March 1, 2018

CACI's Legislative Agenda

Below is a list of bills and their status on which CACI Policy Councils have taken positions. For more information on the bills, contact Loren Furman, CACI Senior Vice President, State and Federal Relations, at 303.866.9642.