WASHINGTON — A substantial decline in oil and gas production on federal lands has cost Colorado nearly one-quarter of its revenues from royalties and taxes translating into fewer jobs and less funding for roads, education and essential government services.
Colorado’s loss of $56 million dollars from 2008 to 2012 is blamed on delays imposed by President Barack Obama’s land managers, who critics say have thrown up so many new bureaucratic brick walls that producers have no choice but to abandon energy exploration on federal lands.
“I believe they are deliberately slowing down leases and that is a direction from Washington, D.C.,” said Kathleen Sgamma vice president of government and public affairs for the Western Energy Alliance, which calculated the financial loss to the state and ultimately to local communities.
“I think it’s clear in the number of how many fewer leases are offered and issued each year,” Sgamma said. “They are offering less, taking longer to review each lease nomination, and if they get any pushback from the public, they just simply pull leases from sales.
Applications to drill on federal lands are down 38 percent in Colorado since 2008, and just last year 72 percent fewer leases were issued than in 2008.
“Companies are going elsewhere where it is easier to develop, where it doesn’t take us eight years, it takes maybe two years, and where we can get our permits in 45 days, not 228 days,” Sgamma said.
Colorado benefited from a severance tax payoff of $273 million in 2009 for oil and gas operations on federal lands, but that dropped significantly to $64 million in 2010 and only crept back up to $138 million in 2011, according to the Bureau of Land Management.
If leasing and permitting were restored to pre-Obama levels in 2007 and 2008, Colorado would collect an additional $54 million through 2015 from severance and ad valorem taxes, the American Petroleum Institute said in a report last year. In addition, the federal government would reap $186 million from production in Colorado.
The effects of lost income and energy-related jobs are becoming apparent on the Western Slope where federally controlled lands dominate the landscape, said Republican Rep. Scott Tipton, who represents the sprawling 3rd Congressional District.
“It is impacting our communities at the county level and city level, it’s going to be impacting our ability to provide education for our children, and it’s going to have a domino effect throughout Colorado,” Tipton said. “I think the impacts that we are seeing now — I look at it as I’m driving through communities — you are seeing roads that the community simply aren’t able to repair because they don’t have the resources.”
“Services will decline because the revenues aren’t going to be there, and that’s just on the government end of it. The important thing is looking at the unemployment level we have in the state,” Tipton added.
Colorado’s unemployment rate is hovering at 7 percent, but some counties continue to see double digits.
Meanwhile, the energy sector provides a half-million jobs throughout the West, of which nearly 50,000 are direct and indirect jobs in Colorado that kick back $800 million annually in income taxes. That economic impact includes nearly $4 million in Colorado wages.
If energy leasing permits were returned to pre-Obama administration levels, the American Petroleum Institute estimates another 20,000 jobs would be added to the rolls in the West, and state’s revenues boosted by $1.2 billion.
“It’s almost a tragedy the federal government is trying to restrict that opportunity to create jobs and to be able to create American energy certainty,” Tipton said.
Critics say the drop in revenue experienced in Colorado corresponds to the drop in permits approved on the federal level.
During the last year of the Bush administration in 2008, nearly 700 drilling permits were approved in Colorado, but that figure dropped to less than 500 during Obama’s first year in office. Interestingly the number of leases where energy was moving ahead to production remained stagnant, numbering 2,266 in 2008 and 2009. And by 2010, when the number slid up to nearly 600 permit approvals, the number of operating leases on federal land decreased by more than 100.
Compounding frustration by energy producers in Colorado and throughout the West, Obama claimed in his reelection bid that oil and gas production under his administration was the highest experienced in years.
During a heated exchange with Republican nominee Mitt Romney at an Oct. 16 debate, Obama denied that he cut in half new leases and permits. According to the Annenberg Public Policy Center, Obama actually cut more than half.
The energy boom is actually taking place on private and state-controlled property.
The House Resources Committee estimates it now takes 30 percent longer to get a new federal permit — 307 days compared to only 27 days for a permit to operate on private or state lands in Colorado.
In other words, in the time it takes the federal government to okay a permit, a person could drive from Washington, D.C. to Los Angeles 154 times, or watch the movie “Die Hard” 3,349 times.
Asked how the process could be conducted quicker, Sgamma said “I think it just takes political will on a lot of these issues, and I don’t see it changing anytime soon out of Washington.”
Colorado ranks 7th in total energy production in the U.S because of top producing counties that include Weld, Garfield, Rio Blanco, La Plata, Mesa and Yuma.
The vast fossil fuel resources include the Niobrara shale, which some estimates say could contain two billion barrels of oil. The success of that operation is due to the location of the vast number of permits on private or state land.
The town of Greeley alone collected more than $3 million last year and it is expected to create more than $400 million over the next 25 years.
“Plenty of companies don’t even want to do business on federal lands, they are gone baby, gone,” said Dan Kish, senior vice president for policy at the Institute for Energy Research.
The Energy Information Administration estimates that in 2010, Colorado had a reserve of 386 million barrels of oil, 24,119 billion cubic feet of dry natural gas, and 879 million barrels of liquefied natural gas.
However, Kish says the federal government is increasingly offering leases for sale where no energy is available.
“They work out deals with environmentalists to block lease sales they object to, in other words, where there is oil on it. They only ones offered are lease sales adjacent to oil production. All they will let you do is punch holes in the old place. If you want to punch a hole in a new area and maybe hit the mother lode, they won’t let you. It’s all smoke and mirrors,” Kish said.
“Word has come down from on high, they don’t want any oil production, go spend your time handing out permits for windmills. As the president says, that’s the energy of the future, oil and gas are the energy of the past,” Kish added.
Until oil and gas leases are approved and exploration begins, the industry won’t have a more concrete estimate of the energy available in Colorado or its economic benefit to the state and localities.
Interestingly, the federal government revised its estimates of North Dakota’s oil boom earlier this month, from 151 million barrels to an astounding 7.4 billion barrels.