Gas Facts
Economic Contributions

• Jobs
• Royalties
• Natural Gas Industry Taxes
• Property Tax Table and Bar Chart
• Community Support

The natural gas industry provides economic benefits directly to employees, suppliers, royalty owners, and taxing entities; and indirectly through the creation of jobs, business investment and severance taxes.

Jobs

A strong natural gas industry not only provides jobs in its own sector but also other sectors such as service and retail industries. In Colorado, over 14,000 Coloradoans were directly employed in the gas and oil industry. It is estimated that the natural gas industry supplies 300 - 400 La Plata County jobs. Wages in the gas and oil industry statewide average over $50,000/year, providing La Plata County residents with between $15 and $20 million in annually salaries. These jobs represent a high share of general economic stimulation (from employees buying goods and services) and tax revenues (income, sales, etc.) to the La Plata County and Colorado tax base. Natural gas industry related jobs provide needed economic diversity for La Plata County which is heavily dependant on the tourist industry and lower paying service jobs related to it. Colorado and its counties and its municipalities receive tens of millions of dollars annually in taxes generated from industry employment.

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Royalties

During the depression farmers arrived in the region from the drought-stricken Midwest. The rich mineral deposits of the San Juan Basin brought additional revenue to area farmers and ranchers as the leasing of mineral rights became a very important source of supplemental income. It is estimated that there are between 2,500-3,000 La Plata County royalty owners. The average royalty payment is 1/8th or 12.5% of the natural gas value, with varying conditions in each lease.

Through the Mineral Lease Fund, La Plata County receives hundreds of thousands of dollars annually from leaseholds on Colorado's federal lands. These funds are generally distributed on a formula basis, with the greatest producing counties receiving the largest share of funds.

The State Land Board also collects gas and oil related fees from royalties. In 1996 alone, the Board collected $5.9 million from the gas and oil industry in Colorado. Those funds are allocated to the State's School Trust Permanent Fund.

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Natural Gas Industry Taxes

The natural gas industry pays state and local taxes in the form of corporate income tax, conservation tax, severance tax, property tax and sales tax. Direct taxes paid by the gas and oil industry in Colorado range from $100 to $200 million annually.

For the most part, taxes on the natural gas industry are based on production value. As a result tax amounts can vary due to production volume and the fluctuating price of natural gas. Production volume is based on the number of wells producing and the level of production. The price of natural gas is based on supply and demand, like any other commodity.

At some point in the future, natural gas production from aging wells will decline. However, that decline may not necessarily result in immediate declining tax revenues because the production decline of older wells can be offset by rising natural gas prices or production increases from new wells.

Property Taxes

Gas and oil properties are among the most heavily assessed properties in La Plata County. Assessments are generally 87.5% of annual gross production value. In contrast, residential assessments have been declining to less than 10% and other property is assessed at 29%.

Property taxes collected from the natural gas industry in La Plata County are important funding sources for our schools, county services and municipalities. About half of annual property taxes paid by the natural gas industry go to funding schools in Durango, Bayfield and Ignacio. Fire, municipal and special districts receive approximately 29% of industry property taxes and the county receives about 20%. On average the county uses about a third of that money for road maintenance and construction. La Plata County's 8.5 mill levy is among the lowest in the state as a direct result of the large amount of property taxes paid by the gas and oil industry here.

Since the development of coalbed methane, property taxes assessed to the natural gas industry have become a significant portion of total assessed taxes in the county. The chart above shows the dollar amount and percentage of total property taxes assessed in the county annually.

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Severance Taxes

In addition to property taxes, the natural gas industry pays state income taxes and a special severance tax. The severance tax is paid to offset the limited nature of extractive industries and their impacts to Colorado communities. The severance tax rate ranges from 2-5% of gross production value and is adjusted for transportation and other production costs. The state and local governments split the revenue generated from the severance tax. Half of the money funds the Colorado Oil and Gas Conservation Commission and other Department of Natural Resources programs. The other half is allocated to local governments through the Energy and Minerals Impact Grant Program and direct distribution to counties where natural resource employees reside.

Administrated by the state Department of Local Affairs, the Energy and Minerals Impact Grant Program reviews and allocates funds to about 100 projects annually. La Plata County has received millions in Impact Grants over the last decade -- with most of the money used to improve county roads.

It is estimated that over 50% of the total severance tax money collected comes from natural gas production in the state. Since La Plata County currently produces over half of the state's natural gas that means our county's natural gas producing companies pay a significant portion of the state's total severance tax.

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Community Support

The natural gas industry is an active supporter of the La Plata County community. Hundreds of thousands of dollars have been "given back" through contributions to United Way and a wide variety of other area non-profit organizations. Employees of the industry dedicate hundreds of hours as volunteers involved in government committees and task forces; community boards; business, recreational and agricultural organizations; school activities; scouting and sports teams. In addition, many companies donate "in-kind" materials and supplies to community programs.

Annually, the La Plata County Energy Council hosts a golf tournament, which raises money for area scholarships and community grants. Over the years, the Energy Council raised and distributed tens of thousands of dollars to high school graduates going on to college and to local non-profit organizations. Scholarship applications and local non-profit requests are welcomed.

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