Thursday, April 3, 2008

Ritter Will Torpedo His Own Rainy Day Fund

Ritter's Regs On Oil and Gas Will Likely Torpedo The Governor's "Rainy Day Fund"

DENVER (April 3, 2008) – The announcement today by Governor Ritter and a bipartisan group of lawmakers to create a "rainy day fund" for higher education and local community assistance, paid for from Federal Mineral Lease (FML) revenues, is likely to be torpedoed by the Governor's own plans to tie up the state's energy industry in new regulations and government red tape, according to Greg Schnacke, President of Americans for American Energy. 

"The Governor is encouraging people to count their chickens before they are hatched while at the same time his bureaucrats are scrambling the eggs from the hen house," Schnacke said.  "The Ritter Administration is chasing away from Colorado the very revenue that he wants to use to fill up a rainy day fund."

"Does no one in state government see the incredible irony in what is being proposed here?" Schnacke asked.  "On the same day the Governor talks about taking advantage of increasing revenue from energy production he also refuses to call for a halt to efforts to raise severance taxes on the energy industry."

"Does he not understand that when you tax a thing, you tend to get less of a thing?" Schnacke said.

"Energy markets and the industry are already calculating the cost they will have to absorb from the Governor's harsh new regulatory package and from the higher taxes that are contained in the various ballot proposals," Schnacke explained.  "Since Colorado tax and regulatory policy applies to wells developed on federal lands, the Governor's projections of revenue from those lands are extraordinarily rosy, to say the least.

"By definition, if they want to see this money, they will have to encourage more drilling, not less.  I'm not sure how this fundamental law of economics seems to escape some of those running state government these days."

Schnacke pointed to specific provisions contained within the Governor's regulatory proposal, which you can see here, that will slow down or stop energy production and raise already high energy prices.  "The Colorado Department of Health and Environment and the Colorado Division of Wildlife can make or break these projects they are counting on based on the proposal they have put forward," he said.

"There is an intersection between the cost, delay and uncertainty of getting permits from multiple state agencies as they relate to drilling on federal lands, and how that impacts whether projects go forward in a timely and cost effective way," said Schnacke.  "The biggest example is the Roan Plateau, where the state's regulatory package, if adopted, will certainly devalue what could be a great windfall of up to $1 billion to Colorado from the one-time lease bonus.  If the cost of development gets too high from new regulations and new taxes, companies won't add a bonus to their lease bid, it's just that simple."

Although Governor Ritter has not endorsed any proposed severance tax increase, Schnacke encouraged him to rule it out in favor of the FML shift.  "Americans for American Energy agrees with those members of the Colorado General Assembly who have sensibly embraced this approach over higher taxes.  They know that more regulations and higher energy taxes cost consumers, school districts and communities in the long run," said Schnacke.