For years oil and gas companies have claimed they are a boon for communities across Colorado, saying the taxes they pay help fund education and infrastructure. Now, a lawsuit by BP America seeking to broaden tax write-offs threatens to leave state taxpayers on the hook for more than $100 million.
Two weeks ago the Colorado Supreme Court ruled that the state had been incorrectly applying a tax credit that allows oil and gas companies to write off costs associated with transportation, manufacturing and processing. BP argued this tax deduction should be broader and incorporate the cost of capital, or the hypothetical return that could have been generated by a different investment. In their ruling, the Colorado Supreme Court agreed with BP, broadening a widely used tax credit and further reducing a state tax that’s already the lowest in the West.
Now, with just two days left before the state’s legislative session ends, Colorado lawmakers are scrambling to pay the possible $115 million bill. The ruling is a blow to communities across the state. One estimate predicts that severance taxes, which Colorado communities depend on to fund a wide range of programs — including efforts to mitigate the impacts of oil and gas development — will decrease by 13 percent.
State lawmakers now have an opportunity to close this tax loophole by passing a proposed measures that would define the tax credit as it has been interpreted for the last 13 years, keeping funding for community programs intact. However, oil and gas interests have worked hard to kill these efforts.
Colorado communities deserve a fair return for the oil and gas extracted in the state. It seems that BP America and other oil and gas companies are more concerned with nickel and diming taxpayers than paying their fair share and supporting local communities.