i_wrrc_2016a_2016-08-24t08:16:43z4 Hearing Summary

Date: 08/24/2016

09:32 AM -- Financing Water Projects as related to Colorado's Water Plan and State Wate



Bill Levine, Budget Director, Department of Natural Resources (DNR), discussed the severance tax and it's impact on state finances. Mr Levine distributed a presentation to the committee (Attachment D). He explained how the tax is distributed, explaining that 50 percent of the tax is distributed to DNR. Half of the severance tax finds that are distributed to DNR is then distributed to the perpetual base fund. MR. Levine discussed how Tier 1 and Tier 2 programs are funded within the operational fund, and stated that several Tier 2 programs have large impacts on the water community in the state, including the Water Supply Reserve Fund. Mr. Levine discussed the Colorado Water Board (CWCB) construction fund and some projects that receive moneys from the construction fund.



Attachment D.pdf



09:38 AM



Mr. Levine discussed the current energy prices and how energy prices have decreased in recent years. He explained that lower energy prices have affected the amount of severance tax dollars collected, and discussed the impact of ad valorem offsets on severance tax revenue. Mr. Levine responded to questions from the committee concerning set backs and their impacts on the severance tax revenue stream and current projections for the severance tax revenue, specifically citing a lower impact of the ad valorem offsets. Mr. Levine also responded to questions concerning the affects of the recent Colorado Supreme Court Decision, B.P America. v. Colorado Department of Revenue.

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09:51 AM



Mr. Levine discussed the volatility and variance of the revenue from the severance tax and explained that the revenue stream coming from the severance tax is unpredictable. Mr. Levine further discussed B.P. America and explained the costs of the decision to the state. The decision allows oil and gas producers to deduct a broad array of costs for tax purposes. Mr. Levine explained that the state of Colorado owes B.P. America $2.4 million as a result of the decision and owes other related conferee cases $6.8 million. He also stated that the state must pay amended tax returns related to return on Netback Expense Report Forms (NERF) deductions, totalling approximately $20 million. NERF deductions include direct costs and forgone returns on investment as a result of expenditures for the transportation, manufacturing, and processing of oil and gas. Mr. Levine explained that additional refunds may still be filed, increasing the amount owed by the Department of Revenue. Mr. Levine responded to further questions regarding the decision from the committee.



10:03 AM



Mr. Levine responded to questions from the committee concerning public private partnerships.