Contents

We'll Get it Right Next Time

Show Me the Money

Where Oil Shale Revenues Go

Although no one can say for certain whether oil shale will one day be produced profitably and the royalty rate companies will pay is still a subject of debate, laws are already in place at the state and federal level to distribute any money generated for the public by the future industry.

Roughly half (the exact percentage has fluctuated by a few points over the past few years) of the money that energy companies pay to the federal government as royalties will be returned to the states in which the development occurred. Each state has a different method of distributing these funds. In Colorado, where the richness of the Piceance Basin deposits mean that a successful oil shale industry could translate into enormous amounts of money washing through the state government, this money is funneled into the state's Oil Shale Trust Fund. State legislators created the fund in 1974 as a mechanism to distribute 100% of the state's share of the federal Mineral Leasing Act royalty monies derived from oil shale lands back to local governments for mitigation of the impact of oil shale development on the communities it directly affects.

Shale Country states will also receive money from individual companies in the form of severance taxes, which are charged to energy and mining companies in an effort to recapture part of the public wealth lost when nonrenewable resources are extracted and sold for private profit. In Colorado, which currently charges a lower severance tax than most of its Rocky Mountain neighbors, by law this money must be used for public purposes related to mineral development, for water projects, or help for local governments to offset the impacts of energy development. The state distributes the revenues evenly into two channels: the Severance Tax Trust Fund, which funds statewide mitigation and resource stewardship projects through grants and loans, and the Local Government Severance Tax Fund administered by the Department of Local Affairs (DOLA), which directs 30% (up from 15% in 2007) of all state severance tax money to local governments to address the social and economic impacts of mineral production. Each fund has its own mind-boggling allocation formula and is the source of much political wrangling at the statehouse.

If a new oil shale boom does come to Colorado's Western Slope, these financial mechanisms and their counterparts in Utah and Wyoming will direct a significant portion of money back to the affected communities. Whether it - or any - amount of money will be sufficient to ease the strain of the next boom remains to be seen.³³