Oil and gas industry has Garfield County flush with cash
November 7, 2011
RIFLE, Colo. – Garfield County has approximately $120 million in cash reserves – nearly $100 million in budgetary fund balances, and $21 million in a special energy mitigation fund fed by federal mineral lease fees and mineral severance taxes – largely thanks to the oil and gas industry, according to a county report.
The oil and gas industry has contributed significantly to Garfield County’s institutional and financial well-being over the years, both through property taxes and federal mitigation funds, said Lisa Dawson, director of the county’s administrative services department.
She presented the financial picture from the gas industry’s presence in the county at the monthly Garfield County Energy Advisory Board (EAB) meeting held Thursday in Rifle. Also speaking was Mesa County Commissioner Craig Meis.
Dawson said the heavy fiscal influence of the industry has “pro and con” ramifications.
The EAB is made up of representatives from the industry, local governments and the public. It provides a forum to air concerns and complaints about industry activities, as well as periodic educational presentations.
The county is able to provide services and maintain facilities at a high level thanks to the tax revenues and other funds from the industry, Dawson said.
“The negative point is that our economy is based on an industry with cyclical trends,” she added.
To deal with the booms and busts of the energy industry, Dawson noted that the Garfield Board of County Commissioners has salted away $21 million in a special energy mitigation fund and maintained healthy fund balances in case of future emergencies.
The fund balances, which reached a peak of more than $112 million in 2010, according to Dawson’s report, are intended to provide a financial buffer against difficult economic times, such as the current recession.
“Our county is often complimented for having that foresight,” Dawson said of the fund balances.
The mitigation fund, Dawson said, is specifically meant to provide money for impacts felt by the county as a result of oil and gas drilling activities.
“It’s great that the county has a rainy-day fund,” said EAB member Brent Buss, referring to the mitigation fund. “Who decides when it’s raining, and how do you handle distributions from the fund?”
Dawson said that is up to the county commissioners, who evaluate requests for funding.
For instance, she said, $100,000 in mitigation funds was allocated to the 2010-11 Health Impact Assessment project in Battlement Mesa. The HIA was intended to create a database of health-related information for the citizens of the unincorporated community, where Antero Resources is planning to drill up to 200 wells from nine pads located within the community’s boundaries.
Next year, however, the county’s share of federal mineral lease fees will not go into the mitigation fund.
Instead, those funds will go a newly created, five-county Federal Mineral Leasing District (FMLD). The FMLD board, made up of Garfield County Commissioner Mike Samson and local businessmen Eric Schmela and Gregg Rippy, will decide how to disburse the money under strict guidelines.
Addressing the annual distribution of severance tax proceeds, some of which comes to Garfield County, Dawson said that the 2012 funds will go toward the road and bridge budget.This year, Dawson said, Garfield County collected $95 million in property taxes levied on the industry, which currently is valued at more than $2 billion.
The situation is less dramatic in adjacent Mesa County, reported Mesa County Commissioner Craig Meis at the same meeting.
There, he said, the oil and gas industry was assessed at a value of $193 million in 2010, less than 10 percent of the overall assessed value of the county, which Meis said was $2.3 billion at that time.
“We have assessed-valuation envy over in Mesa County,” Meis joked, although he noted that money from the industry has helped shave the cuts to the county’s 2012 budget from $7 million to $3 million.
He pointed out that oil and gas is taxed at a property tax rate of 87.5 percent, compared to a rate of 29 percent for business and commercial property, and 7.96 percent for residential property.
“What’re we going to do if the gas companies move out?” asked EAB member Kelly Lyon of Silt, voicing a concern held by some in Garfield County who worry that overly zealous regulation and other difficulties might drive the industry to give up working in this region.
“I just don’t see a complete shutdown like we saw in the mid-1980s,” responded Meis, referring to the notorious oil shale bust of 1982.
He noted that the gas companies have significant investment in the ground here, in the form of pipelines and other infrastructure, and that the country as a whole is “using natural gas more and more.”