Federal Mineral Lease and State Severance Tax
Direct Distribution
Data Used for Determining the Distributions - Coming in August 2009 |
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What kind of information can be found on this page?
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What kind of information can be found on this page?
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What kind of information can be found on this page?
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The Colorado Department of Local Affairs (DOLA) distributes revenue derived from energy and mineral extraction statewide. These revenues come from State Severance Tax receipts and Federal Mineral Lease non-bonus payments.
Senate Bill 08-218 and House Bill 08-1083, which passed in the 2008 state legislative session, made significant changes to the method and process for the distribution of State Severance Tax and Federal Mineral Lease receipts to local governments. The first payments under this new annual distribution method will be made in the last week of August 2009.
As such, no longer will these funds be distributed based solely on the Colorado Employee Residence Reports (CERR). Additional factors - new well and mine permits, mineral production, population and HUTF road miles - will be used to determine the distribution of these revenues to local governments.
PDF | Flowchart of Federal Mineral Lease Distributions
PDF | Flowchart of Severance Tax Distributions
Forms
PDF | W-9 form
PDF | DOC Automatic Deposit Form (or EFT)
Factor Weights for 2009
Pursuant to C.R.S. 39-29-110(1)(c) and 34-63-102(5.4)(c), the DOLA Executive Director, in consultation with the Energy and Mineral Impact Assistance Advisory Committee, has set the discretionary factor weights for the the August 2009 direct distribution of State Severance Tax and Federal Mineral Lease Proceeds.
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Factor |
Weight for August 2009 |
Colorado Employee Residence Reports |
50%* |
Mining and Mineral Permits |
25%* |
Mineral Production |
25%* |
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Factor |
Weight for August 2009 |
Population |
34% |
Colorado Employee Residence Reports |
33% |
Road Miles |
33% |
* These weights are set in C.R.S. 39-29-110(1)(c) and are not discretionary for 2009.
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Factor |
Weight for August 2009 |
Colorado Employee Residence Reports |
35% |
Federal Mineral Lease Revenue Generated |
65% |
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Factor |
Weight for August 2009 |
Population |
34% |
Colorado Employee Residence Reports |
33% |
Road Miles |
33% |
Legislative Changes
HB 08-1083
Governance and Direct Distribution of
Local Government Mineral Impact Assistance
1. Change in the composition and role of the Energy Impact Assistance Advisory Committee
- To improve accountability the legislation provides for the following:
- Adds two impact area citizen representatives to the committee which oversees the local government energy and mineral impact grant and loan decisions
- Requires the Governor to appointment the seven citizen impact area representatives and have them be confirmed by the Senate
- Adds the executive director of the Department of Public Health and Environment, and,
- Enhances the policy oversight responsibilities of the advisory committee.
- Requires written guidelines for both direct distribution and distribution of grants
2. Change in the guidelines, reporting and accountability on the distribution of the local government mineral impact assistance grants
- To improve transparency, the legislation specifies that in the administration of the local government energy and mineral impact assistance fund, the Department of Local Affairs will compose guidelines and make reports to the State Auditor.
3. Modification of the metrics used in the direct distribution payments to local governments
While maintaining the 70% - 30% split of severance tax receipts between the grants program and the direct distribution, the legislation makes five modifications to the direct distribution statute. The first application of the new language would be for the direct distribution in August, 2009; using 30% of the DOLA 50% share of severance tax.
- Clarifies which taxpayers should make the reports: the legislation links the employee resident reporting requirement to an existing taxpayer filing requirement in the severance tax statute.
- Clarification of which employees should be reported: The legislation removes the restrictive language and allows the taxpayers to determine who they report within the statutory specification “for the purposes of extracting”.
- Addition of mining permit and production to the current employee residence reports (ERR) as metrics on which to calculate the direct distribution payments:
Each of these metrics is intended to capture a different part of the “life cycle” of impacts: the permits for the prospecting phase, the employee residence reports for the development phase, and the production for the production phase. Since the permits and production data do not provide sub-county detail, the new formula would operate in a two stage process. First a “county area allocation” would be made using the three metrics. Then, within each county, this “county area allocation” would be distributed to the towns and county on the basis of the employee residence report, population and the HUTF miles figures provided by CDOT.
The weighting of these factors is set in the first year at 50% ERR, 25% POP and 25% HUTF. Following years the weights must be at least 30%. The Employee Residence data is designated by mineral type. Then it is applied to the severance revenue by type to get a different payment per reported employee for each mineral type. Oil and gas paid $1,555 per reported employee last year while coal paid $468 and metals only $393.
The legislation requires specific guidelines and reporting: Construction of each index requires some technical policy decisions. Under the bill these types of issues would be brought before the Energy Impact Assistance Advisory Committee for resolution. The department will bring these policy issues to stakeholders and the Committee over the next six months.
4. Cleanup of inconsistent language in the federal mineral lease distribution formula
SB 08-218
Allocation of Federal Mineral Lease
The legislation achieves the following four actions:
1. Separates out bonus and rents from the other federal lease revenues and splits these bonus revenues 50/50 between reserve funds for the local government metric based direct distribution and the higher education. The local direct distribution reserve fund from the bonuses may be used to backfill the local direct distributions from DOLA when state federal mineral lease receipts decline more than 10%. The higher education reserve serves a similar function.
2. Allocates the non-bonus revenues at follows:
- 48.3% to the State Public School Fund up to $65 million inflated at 104% after FY11.
- 10% to the Colorado Water Conservation Board up to $14 million inflated each year.
- 1.7% to school districts in the impacted areas up to $3.6 million inflated each year.
- 40% to the Local Government Mineral Impact Fund without a cap. This DOLA local fund is further split 50/50 between the grants programs and a metric based direct distribution.
3. The spillover from the caps on K-12 education, Colorado Water Conservation Board (CWCB) and the school districts go to fund higher education.
4. The direct distribution from DOLA is made in August of each year to county areas on the basis of a metric composed of the amounts of federal mineral lease revenue generated in the “county-of-origin” (COO) and the employee residence reports collected under HB-08-1083 Within each county this “county area allocation” would be distributed to the towns and county on the basis of the employee residence report, population and the HUTF miles figures provided by the Colorado Department of Transportation. The weighting of these factors is left to be determined by DOLA and the Impact Assistance Advisory Committee, with the exception that DOLA may accept a memorandum between county and its municipalities that directs an alternative allocation.