Opaque Oil and Gas Benefits: CHC’s Response to Comments on Economic Impact Report

Communities are being forced to accept major environmental and health risks in the name of economic benefits in the form of oil and gas development, with the assumption that the economic gains are guaranteed and outweigh potential costs. These are difficult pills to swallow when the decision-making processes are not transparent, and the revenue streams are so convoluted that only one or two people in the County fully understand them. The goal of CHC’s report, “Economic Impact of Natural Gas Development on Delta County,” was to conduct a project-specific cost benefit analysis and begin an open, transparent public debate on the true economic costs and benefits of oil and gas development.

Let’s be clear. An organization like CHC should not have had to conduct this type of cost-benefit analysis. It is the responsibly of local and county governments to undertake this work as a part of their decision-making process on industrial projects with long-term economic, public health, and environmental impacts.

The key finding from our report is that the proposed North Fork Mancos Master Development Plan (NFMMDP) could result in a substantial negative financial impact on the Delta County budget. This calls into question the assumptions around the economic benefits promised by the oil and gas industry to rural communities like Delta County, and shows the need for further study of the impact such projects would have on the resilient and sustainable economy the North Fork Valley has worked so hard to build.

CHC’s first-of-its-kind report and the presentation of its findings to the Delta County Commissioners were met with a wave of comments and critiques by the County and industry. We submitted a detailed rebuttal to these comments to the County Commissioners. Here is a brief summary of the comments and our response:

  • The report was criticized by the Local Government Designee for not addressing the current level of oil and gas development in Delta County. It is the County’s responsibility to question past, present and future assumptions, especially as they relate to the impact oil and gas development could have on the housing market, property values, and sales tax in Delta County. While there have been more than 60 wells drilled in the area, it is important to note that there are only 4 wells currently producing in any capacity in Delta County. The remainder of the wells are plugged and abandoned. It is only recently that the public has become aware of issues related to such wells, as well as associated flowlines and other infrastructure. Recent tragic events such as the home explosion in Firestone, CO this past April, which killed two people and was caused by the failure to cap an abandoned flowline, have brought these issues closer to the forefront of public concern. To date, oil and gas development in Delta County has been primarily exploratory and scattered throughout the County.

  • The Local Government Designee focused on the need for more local data on the impact of outdoor recreation in Delta County. This is something CHC has also called for, however the County has the responsibility to be proactive and heed the warnings from other communities that have been negatively impacted by oil and gas development.

  • West Slope Colorado Oil and Gas Association (WSCOGA) presented comments to the Commissioners and also submitted a 10-page letter. WSCOGA accused CHC of cherry picking the oil and gas revenue sources addressed in the report to the disadvantage of the industry, and implied that the NFMMDP could be worth millions of dollars to Delta County in the form of severance tax and federal mineral royalties benefits, by including projects and revenues that result from the redistribution of the entire pool of severance and royalty tax revenues (which includes mining, oil and gas, and metals). By including revenues beyond what would be directly distributed to the County based on location of production, WSCOGA is creating a misleading distraction from the goal of conducting a project-specific cost-benefit analysis.

  • WSCOGA’s comments did not attempt to consider the specific contribution of the NFMMDP. The portion of the NFMMDP within Delta County could generate as much as $158,100 in federal mineral royalties (less than $16,000 directly to Delta County) and as much as $118,258.80 in state severance tax (but less than $18,000 directly to Delta County), however only a very small portion of that revenue would actually be directly redistributed to the County where production originated.

The processes through which Counties and local governments derive oil and gas revenue is convoluted and opaque. The County directly assesses property taxes, both on production and other oil and gas related property, but the valuation rules are complex. The state assesses severance tax, a particularly fraught process in Colorado, and then redistributes the money though myriad state and local agencies and programs. Finally, the federal government collects mineral royalties and redistributes them through an even more complicated system of agencies and programs.

It is frankly unacceptable that communities are constantly asked to trust that the economics of industrial development are worth the risk, when it is so difficult for any one person to have a complete understanding of how the economics actually work. Our report is a first step towards a project-specific cost benefit analysis and addressing this imbalance. Given how extremely complex these processes are, it is vital that we hold our decision-makers accountable to public and transparent decision-making process, which included openly debating the values and risks associated with industrial-level oil and gas development.
You can read the full text our rebuttal to County and industry comments here.

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