Rangely – The two dozen retirees around the tables at the Radino Senior Center bow their heads and thank Jesus for a hot lunch before they dig into meatloaf and potatoes.
They also have – or, at least, used to have – the energy industry to thank.
A use tax levied by Rio Blanco County for 24 years on motor vehicles and construction materials purchased elsewhere has helped pay for senior meals, a safe house for battered women, park upkeep and more than a dozen other programs in this one-stoplight county of 6,000 people.
The majority of the tax, which put $720,990 in county coffers last year, comes from energy companies paying on the permanent fittings for oil and gas wells, pipeline materials and building supplies. But despite a significant jump in oil and gas activity, use-tax collections this year dropped 42 percent through May because two of the largest companies tapping into the vast oil and gas reserves underlying this northwest Colorado county are refusing to pay most of their use taxes.
Exxon Mobil and EnCana owe more than $1.5 million in use taxes, including penalties and interest, county officials say.
Officials for EnCana argue that preassembled materials brought into the county should not be subject to the tax.
Exxon Mobil attorneys cite that point and a number of others: The tax should not apply to machinery and equipment used in oil and gas operations because they don’t fall under the legal description of construction and building materials; Rio Blanco County is part of a Colorado Enterprise Zone where the state waives its use tax, and the county should as well; and the county has been basing its tax bills on incorrect estimates.
County officials rebut all those claims, and tax examiner Debbie Morlan notes that the county has been forced to estimate Exxon Mobil’s taxes because the company has not provided the required monthly information on its purchases.
The battle with Exxon Mobil, dragging into its third year, is compounded by EnCana’s withholding of taxes.
County use-tax administrator Tom Judd estimates that the county, which has total annual revenues of about $13 million, is losing as much as $20,000 monthly in unpaid use taxes.
No programs have been cut so far, but the county has had to dip into its general fund and anticipates the real impact will hit later this year. County residents who benefit directly from the tax say they fear a ripple effect if some of the 100-plus smaller commercial use-tax payers follow the example of EnCana and Exxon Mobil.
Rio Blanco County Commissioner Ken Parsons said he thinks it is already happening – with EnCana following the lead of Exxon Mobil, a company that had record earnings of $8.4 billion for the last quarter of 2004.
“We’re thinking this is, indeed, a domino effect. They are protesting the same thing,” Parsons said.
Seniors are showing their displeasure by sending messages on paper plates to EnCana and making plans to picket July 21 when the county holds a hearing on the dispute with EnCana. Exxon Mobil has already had a county hearing and has turned to the Colorado Department of Revenue to appeal the county finding that the tax is fair.
“This reminds me of the golden rule: These guys have the gold, and they want to make the rules,” said retired pipe fitter Larry Brown, who will take part in the seniors’ protest.
EnCana spokesman Doug Hock disagrees.
“We are not opposed to paying the use tax. We just think it is misdirected. Our view is that the county use tax is contrary to state law,” he said.
Hock said EnCana has donated $90,000 to various pro jects and entities in Rio Blanco County since the company began operations there two years ago.
Voters authorized the use tax in 1981, when Rio Blanco County was in the throes of the oil-shale boom. Initially, the tax was set at 2 percent. In 2002, residents voted to increase it to 3.6 percent.
Judd said the county opted for a use tax on construction materials and motor vehicles because it does not have a strong sales-tax base.
Rio Blanco County has no Wal-Marts, Home Depots or grocery chains. What it has is a sea of oil under its 3,228 square miles. More than 1,700 wells – about 800 of those belonging to Exxon Mobil and EnCana – are producing oil and gas on those lands. Also, nearly a dozen rigs are drilling new wells in the county, up from one or two rigs at work last summer.
Several large pipeline projects are planned. EnCana, a Canada- based company that posted a 510 percent increase in fourth- quarter earnings last year of $2.58 billion, is set to build a $22 million processing plant near Meeker.
In Colorado, 23 other counties have use taxes on building materials. Chip Taylor, legislative director of Colorado Counties Inc., said he has not heard of similar disputes over use taxes.
Taylor echoed Parsons in expressing a fear that the tax protests could have a ripple effect in Rio Blanco County.
“My guess is if EnCana can win a decision, they will all jump on board,” Taylor said.
So far, the smaller operators in Rio Blanco County have continued to pay their use taxes.
Staff writer Nancy Lofholm can be reached at 970-256-1957 or nlofholm@denverpost.com.
