Industry reacts to Gorman’s election as Garco assessor
November 19, 2006
Several natural gas industry representatives say they stand ready to work with the newly elected Garfield County assessor to make sure they pay their fair share of taxes. But that doesn’t mean the industry agrees with his assertion that auditors are likely to find underpayments are occurring.”I have a hard time believing they’re really going to find anything significant,” said Duane Zavadil, vice president of government and regulatory affairs for Bill Barrett Corp., which has been active in gas drilling south of Silt.Doug Hock, spokesman for EnCana Oil & Gas (USA), a top gas producer in the county, said he doesn’t know the basis for Assessor-elect John Gorman’s contention that the industry isn’t fully reporting its production for tax purposes. But he said EnCana wants to work with Gorman, provide him whatever information he needs, “and have him understand how we go about our business. So we would look for an opportunity to have a dialogue with him.”Williams Production, another leading local gas developer, also is prepared to work with Gorman, said company spokesperson Susan Alvillar.”We’ll certainly cooperate fully with him to the degree we’re required to,” she said.”I think in the end of the day if there’s a discrepancy that’s found through the audit process Williams, as it had in the past, will pay the appropriate amount of taxes,” she said.Gorman, a Democrat, will take office Jan. 8. He ousted Republican incumbent Shannon Hurst in this month’s election largely on a campaign based on the assertion that the gas industry needs to be better scrutinized for tax valuation purposes. He says other taxpayers are having to pay more than they would if the industry were held accountable, and the industry could owe millions of dollars in back taxes.Alvillar noted that some ways the industry has been taking deductions have been scrutinized by courts, and she said Williams stopped taking some deductions in 2001 because of other court cases.This year, the Colorado Supreme Court refused to hear an appeal by Williams in a suit brought by gas-royalty owner Joan Savage of Rifle. Savage accused Williams of improperly deducting certain production-related costs from her royalty payments. Williams has been the target of other local royalty suits, including a recently filed class-action lawsuit.Alvillar said Williams always has worked with the Assessor’s Office to make sure it’s paying the right amount of taxes. She said the company is motivated to do so because it has employees who live in the area and who have children in local schools. Western Garfield County schools rely heavily on the gas industry as a tax source.Zavadil said he understands government’s desire to hold the industry accountable. But Bill Barrett Corp. agrees with Hurst’s assertion during the campaign that it’s unlikely an audit will find significant accounting issues associated with gas production, he said.He said gas companies undergo meter checks and periodic auditing in connection with production on federal lands. Partners in wells and royalty owners also monitor production figures, Zavadil said.In addition, publicly owned companies such as Bill Barrett Corp. face increased federal scrutiny these days to ensure that they are operating in a financially appropriate fashion, Zavadil said. That’s because of new federal laws passed in response to accounting and reporting scandals involving corporations such as Exxon.Duke Cox, a Silt-area resident who has been involved in trying to help protect landowners from drilling impacts, cheered Gorman’s election but said it also will be up to county commissioners to give him the funding needed to audit the industry. He worries whether commissioners Larry McCown and John Martin will support the audits.However, McCown notes that the county already was involved in an audit with the help of consultant Mary Ellen Denomy. Denomy resigned from the work in October in a dispute with Hurst over both of their expectations regarding the work she was to do.McCown assumes auditing of the industry will go forward. But as aggressive as the county may try to be in that regard, it’s hard to get very far until companies produce the necessary information, he said.”They have a certain period of time to respond, and they usually take right up to the last day,” he said.Gorman said he is expecting that commissioners will continue their support for auditing the industry.”If you don’t ask [the industry], you won’t get. We’re going to be asking,” he said.Greg Schnacke, with the Colorado Oil & Gas Association, said he doesn’t think there is widespread underpayment of taxes by energy companies in Garfield County.”My experience with companies is that companies spend an awful lot of time with their accounting and their accounting divisions trying to satisfy the law.”Alvillar, of Williams, called Gorman’s campaign focus on the gas industry “unfortunate.””I think the audit process and the royalty process in general is a very, very complicated process. It’s misunderstood by many people,” she said.Hock, of EnCana, saw a message for the energy industry coming out of the central issue in the assessor’s race.”I think what it tells me is we need to continue to try to build our transparency and continue to work on building trust with the people of Garfield County,” he said.The Aspen Times, Aspen, Colo.