31 Jan Updated Report: Economic Impact of Natural Gas Development on Delta County

Citizens for a Healthy Community released the second edition of its economic study of the North Fork Valley, with a particular focus on the impact of oil and gas development.

This cost-benefit analysis is a first of its kind on a proposed oil and gas development project in Delta County, Colorado. The general argument made by Delta County Commissioners, in favor of supporting natural gas well projects in the North Fork Valley, is the economic gain the County and the community will receive from these projects. However, the oil and gas industry often uses inflated and aggregated numbers to prove their case, so a careful analysis is warranted.

Delta County is not alone among counties across the State that support oil and gas development projects and accept without question the economic benefits claimed by the industry. However, given the complexity of the costs and benefits, a careful analysis is important for specific projects to confirm or reject those assumptions and to analyze the impact that such development would have on existing county revenues, and other sources of economic development.

CHC is challenging those assumptions in Economic Impact Of Natural Gas Development On Delta County. In this second edition, we updated our findings with new data, followed the money, and addressed the convoluted and complex system used to redistribute severance tax and federal mineral royalty revenues back to the county government. We also broke down the various categories of property tax revenue generated for the county from production, pipelines, and associated equipment.

We conducted a detailed analysis of the complex and varied means by which the proposed 35-well North Fork Mancos Master Development Plan (NFMMDP) would generate revenue for Delta County, and compared it to the project’s potential negative impact on other, existing sources of revenue for the County—residential and agricultural property taxes, and sales tax revenue associated with outdoor recreation and agritourism.

Have you ever wondered:

• How exactly oil and gas development projects generate revenue for Counties?
• How much the North Fork Valley contributes to the County’s property tax revenue? Or how oil and gas developments could affect that contribution?
• How the recreation industry contributes to the County’s budget? Or how it could be negatively impacted by oil and gas development?
• How much the North Fork Valley’s burgeoning agritourism industry contributes to the County? Or what impact oil and gas development would have on it?

CHC’s research and analysis is based on information from economists, state and county government officials, state and local tourism boards, local realtors, agritourism boards, recreation industry representatives, and oil and gas industry analysts. Based on the best available data, we were able to estimate the economic value of real estate, agritourism, and outdoor recreation to the North Fork Valley, the value of oil and gas wells to the County, and the impact of oil and gas development on the local economy and the County’s leading sources of tax revenue—residential property tax and sales tax.

The North Fork Valley has worked hard to create a diverse and sustainable economy. Our research shows just how valuable it is, and how important it is in supporting a stronger county-wide economic model. While oil and gas projects will certainly generate some revenue for the County, our analysis shows that the story doesn’t end there. For example, the proposed North Fork Mancos Master Development Plan generates much less in severance tax and federal royalty minerals revenue than the industry and the County would lead you to believe, and could result in an estimated net loss of revenue to the County due to the potential negative impact on existing revenues.

This report shows that the County and the oil and gas developer’s claims of economic benefit from such development projects should be subject to much greater scrutiny.

Highlights of findings:

• The North Fork Valley makes a large contribution to the County’s tax revenue base. The $600 million dollar market value of the NFV’s residential and agricultural real estate results in $2.25 million in property tax revenue to the County, which amounts to 16% of the County’s 2016 property taxes revenues.

• 19% of Delta County’s sales tax revenue is attributed to recreation, and agritourism.
• Oil and gas development could result in a 26% decrease in Delta County residential property tax revenue and the sales taxes generated from recreation and hunting.
• Only 15% of severance tax collected is directly distributed to the County of origin (less than $18,000 per year for the NFMMDP).
• Less than 10% of federal mineral royalties collected are directly distributed to the County of origin (less than $16,000 per year for the NFMMDP).
• Only about 1% of federal mineral leasing royalties collected (under $1,400 per year for the NFMMDP) are directly distributed to the Delta County School District.
• Over its lifetime the NFMMDP could generate up to $437,000 in revenue for the County. But it could result in a loss of $810,000 in residential and agricultural property taxes and sales tax associated with outdoor recreation and agritourism, for a net negative revenue impact of approximately $400,000. For nearly every dollar gained by the proposed project, the County could lose nearly $2.00 in existing revenues from proven economic development.

Read the full report here.

CHC also published a Guidebook for communities on developing a cost-benefit analysis on oil and gas development. You can download it here.