Repeal Severance Tax Exemption for Stripper Wells
If enacted, HB 1367 will amend Colorado state law to remove tax exemptions that benefit operators of older and less productive oil and gas wells, thereby aligning their tax responsibilities with those of other production wells. The bill aims to generate additional revenue that can aid in funding local and state initiatives, especially in the wake of community concerns regarding the environmental impacts of older wells. These wells are responsible for a disproportionate share of air and water quality issues, leading to heightened public health risks. Furthermore, since severance tax revenues are allocated to local governments, their removal could influence local government budgets significantly.
House Bill 1367 seeks to repeal the severance tax exemption currently granted to 'stripper wells,' which are oil wells producing an average of fifteen barrels per day or less and gas wells producing ninety thousand cubic feet or less per day. The rationale for this repeal is rooted in the belief that these wells benefit from Colorado's natural resources without contributing a fair share to state revenues through taxes. In 2022, operators of stripper wells extracted minerals worth over $4.2 billion without incurring any severance tax obligations, leading to significant concerns over equitable taxation in the oil and gas sector.
One central point of contention surrounding HB 1367 is the potential financial burden it might impose on operators of stripper wells, many of whom argue that the removal of their tax exemption could jeopardize their operations and profitability. Critics of the bill may view it as an unfair targeting of smaller operators who often contribute to local economies in rural areas. Supporters, however, contend that it is crucial for all oil and gas operations to pay their fair share of taxes to mitigate the long-term impacts of fossil fuel extraction, particularly in areas already suffering from environmental degradation due to older wells.