Sunday, September 19, 2021

With oil and gas production restricted, can Weld County maintain its financial health?

Weld County’s estimated property valuation last year suffered an unprecedented hit of US$2.7 billion, a drop of nearly 18% from 2019. Officials in the county mainly believe that Colorado’s largest energy-producing county has experienced a sharp decline in oil and natural gas extraction.

This means that in this fast-growing county with a population of 330,000, taxes on road maintenance and social services have been reduced by $45 million. Last year, energy mining revenue accounted for 43% of Weld County’s total property tax revenue.

It also presents the prospect that the vast county in northeastern Denver has fallen slowly but steadily from its historical peak of oil production (close to 170 million barrels in 2019), forcing county officials to consider future links with fossil fuels.

Steve Diederichs, vice president of energy research company Enverus, said: “If you don’t plan to reduce your dependence on oil and gas, you may miss your goals.”

In the past two years, the output of the Weld County oil field has fallen sharply, and by 2020, the operator’s production will be slightly less than 150 million barrels. According to production, this year’s production is expected to fall by another 30 million barrels. The data is kept by the Colorado Oil and Gas Conservation Commission.

The reasons for the recent decline are varied and complex, including the pandemic’s suppression of travel demand for most of the past 18 months, fluctuations in international markets that have caused oil prices to briefly drop to zero, and the impact of a major energy reform bill passed by Colorado The legislator two years ago.

However, the county’s property tax base has been significantly affected, from $15.2 billion in 2019 to just under $12.5 billion last year.

“This is the biggest drop in recent memory,” said Brenda Dones, an assessor in Weld County.

Diederichs’ company believes that as “stocks begin to decrease,” Weld County’s mining volume will stabilize in the next five years, and then shrink again at the end of the decade. The rate at which production declines in the next few years will be of great significance to Weld County—it produces nearly 90% of Colorado’s oil. And because commodity tax rates are much higher than residential or commercial real estate, it plays a huge role in Weld County’s financial situation.

“I think we are diversifying our tax base, but oil and gas drive the largest share of assessed value,” Donnes said. “Most likely, the appraisal value will continue to decline.”

Another boom and bust?

Weld County Finance and Administration Director Don Warden (Don Warden) said that Weld County does have some key cards that can be used to offset the decline in production in the Denver-Julsburg Basin, which is The huge mine field below it.

The county is accustomed to the boom and bust cycles of oil and gas, and over the years has developed strategies to deal with the ebb and flow, including depositing hundreds of millions of dollars in a reserve fund. Weld County has a $100 million general emergency fund, another $100 million public works reserve fund, and a $36 million county building reserve account.

“We keep this money on the day it starts to fall,” Warden said.

He said the county also tends to use its oil and gas tax revenues for large one-time expenditures. For example, a few years ago it spent $160 million to build a four-lane county road 49 that connects Kersey to Interstate 76. It also stepped up to use a new $40 million prison with mineral proceeds.

Warden said this makes Weld County’s daily service obligations less subject to the unpredictable impact of the energy market.

Then came the county’s explosive growth-according to data recently released by the U.S. Census Bureau, it grew by more than 30% from 2010 to 2020. Ten years ago, there were 250,000 people in the county, and now there are more than 70,000 people, many of whom have settled along the Interstate 25 corridor in the bedroom booming cities of Johnstown, Erie, Dakono, and Firestone.

In the past 10 years, Weld County is second only to Broomfield County in terms of Colorado’s population growth rate. The State Census Office estimates that by 2050, the county will have more than 700,000 residents.

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Warden said all these new homes, grocery stores, and open-air shopping centers will increase Weld County’s tax base, but they must work harder to make up for any losses in the county’s oil fields: Colorado’s Oil and Gas Department The tax rate is as high as 87.5%, which is three times the commercial property tax rate and more than 12 times the residential tax rate.

Warden said that the explosive rise in home prices in Colorado in recent years has helped improve this side of the tax ledger, but if needed, Weld County has the last trump card on hand. It can significantly increase the factory tax to the highest level allowed by state law, increase the property tax for homeowners, and cancel the property tax credits they have received over the years.

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Warden said that this one move alone can offset the loss of revenue caused by the decline in oil and gas production.

“We have warned that one day we will not be able to extend factory credit,” he said.

The Platte Valley School District in Kersey is located in the center of the Weld County Energy Matrix and has long relied on energy mining taxes to operate. Long-term head Glenn McClain said that as much as 95% of the district’s 1,200 student budget comes from oil and gas funding.

Last year, his school district’s assessed property value fell even more than 34% of the entire county. But McLean has experienced production stagnation and price collapses in the past, and he said that caution and planning will help Platt Valley move forward.

“We have put money aside, and we are very confident that we can make a huge change two to three years ago,” he said. “This is a correction-I think it will come back, but it may not come back all the way.”

Joe Salazar, executive director of Colorado Rising, an anti-hydraulic fracturing organization, said that for the Platte Valley School District and the entire Weld County, the better plan is to move away from energy extraction faster and reduce “its eggs” boom and bust oil and gas. Natural gas basket. “

“If Weld County does not begin to diversify its tax base now, I expect its residents will go through a really difficult period, especially as climate change (mainly caused by oil and gas extraction) begins to affect other Weld County industries, such as Agriculture and pasture,” Salazar said.

He refuted the views of Senate Bill 181, which was passed in 2019, added to the frustration of oil and gas operators, and gave cities and counties more control to regulate the industry, which led to Weld County’s recent Income challenge.

“Ready to adjust”

But Dan Haley, head of the Colorado Oil and Gas Association, believes that SB 181 does exactly that. Since January, Weld County has not approved the site selection permit for new oil wells, and he fully complies with the requirements of the new regulations.

“With the formulation and implementation of these rules, there has been a huge slowdown,” he said.

With oil and gas production restricted, can Weld County maintain its financial health?
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