"Bargain basement" severance taxes and a "dizzying array of exemptions and deductions" for the energy industry is costing Colorado a lot of money, according to a report by a nonprofit renewable energy group.

The Carbondale, CO-based Community Office for Resource Efficiency (CORE) estimated that Colorado has lost more than $1 billion because of the low-tax scheme and incentives allowed for the state's energy industry. CORE estimated that the loss in revenue has cut into spending on higher education, health care and dealing with the growth on the Western Slope of Colorado, where most of the oil and natural gas drilling is taking place.

The report, "Torched and Burned: Why Does Colorado Subsidize the World's Most Profitable Industry?," said that unless Colorado reforms some of the "Byzantine provisions" in the state tax code and increases severance taxes, the state could lose out on another $10 billion in the next 30 years, during which experts project a growing natural gas boom in the state.

"We are offering up our natural resources to the oil and gas industry at blue-light special prices," said CORE's Randy Udall, one of the report's co-authors and director of the Aspen, CO, office. "Our neighbors in Wyoming, Oklahoma, and New Mexico are charging a fair price for the same oil and natural gas we are giving away almost free in some Colorado counties."

According to Udall, three-quarters of Colorado's producing oil and gas wells pay no tax at all because of an exemption designed to encourage producers to continue operating older, less profitable wells. The report cited the difference between severance tax collections in Colorado versus Wyoming, another booming energy state: If Colorado's producers were taxed at Wyoming's severance tax rate, Colorado would have collected $1.3 billion more between 2002 and 2006.

Among the findings by CORE:

An EnCana Corp. spokesman said comparing the two states was like comparing apples to oranges. Colorado's geology is more complex, which makes drilling more expensive, said the spokesman. Also, he said Colorado has more private land, which requires industry to spend more money to pay royalties to those that own the mineral rights.

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