June 15, 2011 03:02 AM UTC

Keep the sand: insult to injury?

• 4 Comments
• by: JeffcoBlue

(Goliath gets refund from David? – promoted by Colorado Pols)

Here’s a story that really frustrates me. Grand Junction Sentinel:

Some Colorado counties must refund energy companies after a company last year successfully challenged sales taxes charged for hydraulic fracturing.

For Garfield County alone, “It’s roughly $3.9 million that the state is going to withhold from us over the next 11 months in sales tax payments,” said county manager Ed Green.

That will mean budget impacts for county operations as well as outside entities that receive county sales tax revenue, including the local library district, and dozens of human service agencies…

The refunds result from a legal challenge by Noble Energy. Noble contended fracturing companies were charging it sales tax on fracturing materials such as sand but argued there was no purchase of tangible personal property.

In fracturing, fluids are injected into underground under high pressure, leaving behind sand that props open cracks to facilitate flow of oil and gas.

The Colorado Court of Appeals last year agreed with a district court ruling that the sand was not tangible personal property, but an inseparable part of the fracturing process that is the “true object” of the transaction. Noble doesn’t acquire the sand that is left behind underground because it doesn’t own the land where it operates wells, the appeals court ruled.

I’m not sure that anything can be done about this. Like the legislature did with fast food packaging, could this exemption be eliminated legislatvely? Even if that were possible for the future, Garfield County will still be out almost $4 million now, a huge bite from a general fund budget of less than $50 million. Noble Energy? Over $3 billion in revenues in 2010, $725 million net income.

Even if there is no legal responsibility, doesn’t this company feel a moral responsibility to the communities from which it extracts profit? Couldn’t Noble, having won the legal principle it went to court to protect, now decide to not disproportionately hurt Garfield and other hurting Colorado energy-producing counties? Would it hurt them to show some largesse in “victory?”

It’s not for me to decide if Noble legally deserves the right to jerk this money out of our local communities’ needy hands, forcing new and unplanned cuts in already stretched budgets, but I surer than hell know who I feel sympathy for. And it’s not the giant multinational energy company.