Why do the people of Colorado subsidize the oil and gas industry, the world's most profitable industry? Colorado's oil and gas reserves become more valuable every day because natural gas production is declining everywhere else in the U.S. The current drilling frenzy is the biggest boon in state history. Since 1990, Colorado's oil and gas production has increased 500 percent. In 2006, oil and gas revenues reached $9.6 billion and have subsequently exceeded $11 billion a year.

But, for years, the oil and gas industry has been getting a free ride in Colorado because Colorado has failed to collect severance taxes leaving more than a $1 billion a year on the table. In Colorado, the oil and gas industry pays an effective tax rate of 1.9 percent, or one-third of what the oil and gas industry pays in Wyoming and New Mexico. Because of the ad valorem tax deduction, 75 percent of Colorado's oil and gas wells pay no severance tax at all. Unlike every other state, Colorado allows energy companies to deduct county property taxes from their severance tax bill. This ad valorem deduction loophole costs Colorado in excess of $200 million a year and the state will lose more than $8 billion in the next 30 years.


If East Boulder County United cannot keep fracking out of Lafayette indefinitely and fracking is inevitable, then it is crucial for Lafayette and the state of Colorado to set up a permanent fund to benefit current residents and future generations. For example, high school graduates in Wyoming get free college tuition, thanks to the $3 billion in that state's permanent fund. The Navajo nation, which extends across Utah, Arizona and New Mexico, has put aside $1 billion into their permanent fund. The Alaskan permanent fund is valued at $40 billion and each resident received a check for $1,600.00.

The Colorado legislature must eliminate the ad valorem property tax deduction, phase out the stripper well exemption, collect at least 6 percent in severance taxes, levy a new excise tax on oil and gas production whenever the price of oil or gas exceeds certain levels and set up a permanent fund. If the Colorado legislature can adopt these common-sense measures then it would bring in more than $1 million per day into the state's coffers.

Andrew J. O'Connor lives in Lafayette.