Democrats Struggle With Cost And Benefits Of Domestic Oil Production

By Jessica Peck Corry, 11-22-07

Western Democrats are stuck between a rock and a Prius. They want to use booming oil revenues to fund expanded government spending. But saying yes to energy exploration means saying no to the demands of the region’s powerful environmental lobby and a national party agenda increasingly resistant to domestic oil-and-gas development.

Since Colo. Gov. Bill Ritter and legislative Democrats swept into office in January, they’ve floated ideas for what to do with the tax revenue brought in by Colorado’s growing oil and gas companies. In the last year alone, severance taxes collected from the industry totaled nearly $213 million, up sharply from 2003’s $32 million.

Revenue from the severance tax - a levy on all oil, gas, coal and other non-renewable resource extraction in the state - has traditionally been used for a variety of programs geared toward water conservation, regulation of the oil-and-gas industry, heating aid, and grants to governments to deal with the effects of energy extraction.

But Democrats now want more money for more programs and are seeing more dollar signs in state’s oil rigs. The most recent effort came earlier this month, when a special state transportation finance panel, co-chaired by state Treasurer and Democrat Cary Kennedy, recommended to Ritter that he consider a five-part tax increase that would raise $1.5 billion annually for roads. In addition to including a 13 cent tax increase per gallon on Colorado fuel, the proposal also favors increases in the severance tax.

A variety of other efforts, some heralded by Republicans, have focused on using severance taxes to increase funding for Colorado’s local communities, schools, and college campuses.

But this is all just the beginning. When it comes to the serious cash, the real dollars are likely be found through energy exploration of western Colorado’s Roan Plateau, a 73,000 acre parcel that could net state programs more than $5 billion in tax revenue over the course of its 15-to-60 year development.  If a federal plan to allow natural-gas drilling there moves forward, the state could earn up to $1.2 billion in the first year alone.

While Democrats can’t help but see dollar signs in the state’s oil rigs, they are now facing a mounting national opposition to Roan’s exploration. Many national environmental activists, fresh off their successful battle to stall President Bush’s effort to allow drilling in the Alaska National Wildlife Refuge, have turned their sights on Colorado.

Ritter is now undertaking a 120-day review to determine whether he’ll back Roan’s development. His decision is expected shortly. He faces quite a predicament either way - one perhaps even more painful than his recent battle with business leaders over his executive order that pushed collective bargaining on state employees. 

If Ritter backs exploration, it could mean billions for his other budget priorities, including transportation and the state’s schools and universities. Such support, however, could arrive at a painfully awkward time for his national party.

Coming into the Democratic National Convention in Denver next August, national Democrats are pledging an agenda that “will create a cleaner, greener and stronger America by reducing our dependence on foreign oil, eliminating billions in subsidies for oil and gas companies and use the savings to provide consumer relief and develop energy alternatives, and investing in energy independent technology.”

Contrast this agenda with how the Democratic Party characterized the Bush administration’s energy policy, which in 2004 they called “simple: government by big oil, of big oil, and for big oil. This administration let oil industry lobbyists and executives write our nation’s energy policy in secret.”

While certainly Ritter has made good on promises to expand and explore renewable energy options, he now risks being typecast as a voice “by big oil, of big oil, and for big oil.”

In an ironic twist of fate, the timing could actually be good for the region’s energy companies. While Democrats won nationally in 2006 by campaigning against “Big Oil” and tying Republicans to an industry increasingly unpopular in the wake of rising gas prices, things have changed.

While the public still supports a national policy focusing on renewable energy, Americans - especially Westerners - are seeing firsthand the benefits of responsible domestic energy exploration, including job creation. In Wyoming last year, where job growth was second in the nation at nearly 5 percent, 12,800 new jobs were created largely as the result of the state’s booming energy sector.

So who will Ritter side with? He can join with his national party and a powerful environmental lobby, which at the state level includes Environment Colorado, Colorado Conservation Voters, ProgressNow Action and the Colorado Public Interest Research Group. Or, he can side with the oil and gas industry, now positioned to appear as a provider of jobs, energy independence and unprecedented tax revenue.

It’s a tough choice for anyone. But especially tough for a governor trying to shake an image as a back room operator.

Editor’s note: Jessica Peck Corry’s weekly blogs are part of a new feature on NewWest.Net/Politics called “Diary of a Mad Voter,” a group blog, published in partnership with the Denver Post’s Politics West intended give a glimpse into the hearts and minds of several independent-minded voters and thinkers in the Rocky Mountain West in the ‘08 election cycle. Check back this week at www.newwest.net/madvoter.