Colorado energy industry wins big on taxes

Energy companies doing business in Colorado won a major victory in late March when the state Supreme Court cleared the way for industry to deduct costs related to gathering, processing and transporting oil from wells before it pays taxes on oil sales.

The ruling involves a two-person Denver firm, Petron Development Corp., and Washington County, but it will apply statewide, said Mary Huddleston, Colorado’s property tax administrator.

County officials said they fear energy companies may claim millions of dollars in tax refunds for previous years when they did not deduct the costs before paying local taxes. And companies will save millions by deducting those costs from the assessed value of sales.

“Several other companies can now ask for abatements on those paid expenses, and this could snowball into quite a large settlement sum,” Washington County Assessor Ronald Shook told the Rocky Mountain News. “They could do it in other counties, too. It could run into millions of dollars.”

Petron Development, founded by brothers Ron and Jim Walker, manages oil and gas properties for retirees who depend on mineral rights for their incomes, as well as properties for companies that are in bankruptcy or are in dispute. It managed 10 wells in Washington County.

Four years ago, the county advised Petron to pay annual taxes on the gross oil revenue, an assessed value of $800,000. The company balked, saying it should be allowed to deduct $250,000 in costs related to gathering, processing and transporting oil.

“We are talking about $18,000 in additional taxes a year,” Jim Walker said. “But it is a huge sum for the people we represent, people who rely on the mineral rights income to eat and pay their rent.”

The Colorado Oil and Gas Association trade group sided with the company, saying the case could have far-reaching implications for all energy companies.

If Washington County was allowed to tax on the gross revenues, other counties could have gone back a few years and asked for more taxes, the association’s Ken Wonstolen told the News.

“The Supreme Court binds every other court,” Wonstolen said. “There were no dissenting opinions. We were right from the start.”

—The Associated Press