Colorado Faces Choice Between Expanding Education or Continuing to Subsidize Oil Industry

This week Colorado Governor Bill Ritter filed a ballot initiative petition that, if passed by voters in November, would end a $300 million a year subsidy for oil and gas companies.  The property tax deduction for oil companies was originally justified as a way to encourage them to support certain local measures, such as school bonds. Supporters claimed that without the tax break the industry would pay disproportionately more in taxes and thus have an incentive to work against local measures. 

But Colorado is the only state that continues to provide such a generous severance tax break to the oil and gas industry.  And, as Gov Ritter points out, these companies have an obligation as responsible members of the community to support beneficial local legislation. The state should not subsidize this behavior.

The petition would channel the $300 million savings primarily to college scholarship funding for low-income students and measures that would mitigate the impact of the oil and gas industry on wildlife, transportation and water quality.  Oil and gas industry spokespersons, however, claim that companies would be forced to pass on higher prices to consumers.  Ritter countered this attack, explaining that Colorado’s tiny contribution to world oil supplies will have a negligible impact on prices.

The oil and gas industry is expected to spend about $20 million in its campaign against the initiative and supporters of the initiative will spend about $5 million.  Voters will be asked to choose between continuing to subsidize a booming industry or investing money in Colorado families and wildlife preservation.  But as gas prices continue to soar and winter approaches, Colorado voters may fall victim to the threats by oil and gas companies to pass on the burden of the tax.  In order for fairness to triumph, the state must adequately educate voters about the $50 million local communities stand to gain for environmental improvements as well as the increase in low-income students’ opportunity to attend college.