2011 property taxes paid on mineral rights in Routt less than $30K
September 11, 2012
Read about the basics of county property tax revenue from oil and gas production in Thursday’s Steamboat Today.
Steamboat Springs — There is no doubt that subsurface mineral rights, including oil and gas deposits, represent a property right to their owners, but the taxes paid on that property in Routt County are minimal.
"Subsurface rights are the dominant estate. It is a property right; minerals are a property," Routt County Assessor Gary Peterson said Tuesday.
However, his research shows that in 2011 in Routt County, the majority of the owners of severed mineral rights paid less than $10 in actual property taxes on the value of the property and that all of the property taxes collected on those mineral rights added up to $27,252.
"Of the 3,407 taxable accounts, only 18 paid more than $100 in tax," Peterson said. "Seventy-eight percent of all taxable accounts paid less than $10 in tax; 35 percent, or 1,463, actually paid less than $2 in tax; and one-half of 1 percent paid more than $100."
A number of Routt County residents who own rights to the minerals, oil and gas beneath the surface and stand to profit from leases with energy exploration companies have expressed frustration with the pace at which oil drilling permits are being approved here. They've made the case that they have been paying property taxes for many years and have the right to realize the value of their property.
Some owners of subsurface mineral rights have organized as a group called Citizens Supporting Property Rights, which held a second forum in Hayden on Monday to ask candidates for the state Legislature about their stance on government's role in regulating the oil and gas industry. Increasingly, the debate about the permitting of oil wells in Routt County is becoming the defining issue in the fall election cycle.
District 3 County Commissioner Diane Mitsch Bush, who is running against staunch property rights advocate Chuck McConnell for Colorado House District 26, told the audience in Hayden on Monday night that it's the role of elected officials to balance competing property interests.
"We've had oil here since the 1940s, and we can have a balanced oil and gas industry while still protecting our other assets," Mitsch Bush said.
Peterson said Tuesday that after the $27,252 in severed mineral rights taxes collected here are divvied among taxing entities throughout the county, $5,147 goes to the county general fund and another $379 flows into the Road and Bridge fund.
The county actually collected another $13,150 in fees because it charges a flat $5 processing fee on any tax bill less than $10 to cover the expense of administering it.
"If you owe $9.90 in tax, your bill goes up to $14.90," Peterson said.
The distinction between severed mineral rights and mineral rights which remain connected to the surfaced rights is significant, Peterson said, because in Colorado, property owners who hold the surface and subsurface rights are not charged property tax.
The detached subsurface rights have been valued at $6.90 per acre since 1996. As a practical matter, however, property owners are not charged the tax unless they own more than two acres of subsurface rights.
"In our system, it gets rounded to the $10 mark. If the actual value doesn't reach $20, we'll have it on the tax roll, but it will have zero assessed value and won't produce a tax bill," Peterson said. "There are probably 200 of those accounts."
Of the 3,407 taxable subsurface mineral rights accounts here, 61 paid $50 to $99 in 2011 taxes, 257 paid $20 to $49 in taxes and 419 accounts paid $10 to $20 in taxes, Peterson said.
More substantial tax benefits to Routt County would be realized should oil wells go into full production and if property taxes were to be collected on the oil and gas produced as well as the personal property of the companies involved in energy production, Peterson said.
At that point, the county no longer would collect property taxes from the owners of the subsurface mineral rights whose tax burden would shift to state and federal income taxes collectible on royalties paid them as a percentage of the value of the oil and gas produced by the companies.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com