Last week, State Senator Josh Penry and Assemblyman Al White proposed a creating a 'Permanent Fund' to be used for higher education. The Fund would come from the state's share of the royalties from oil and gas development in the Roan Plateau. We don't believe we need to rush development of the Roan, but the Penry/White proposal raises some very important issues.

Colorado is the 6th largest producer of natural gas. We are the 7th largest producer of coal and one of the leading uranium producing states. We also have a large hard rock mining presence. But our severance tax is a joke - this is the state equivalent to the federal royalties program. Colorado's effective tax rate for this one time extraction of minerals, coal, oil and gas bonanza is 1%. The federal government taxes oil and gas at a 12% rate. New Mexico (6.5%) and Wyoming (5%) have robust severance tax programs and have used them to create a permanent fund that does everything from offsetting other state taxes to fund new energy programs. These state's view their mineral wealth as a one time event and are using a small portion of it to ameliorate environmental impact on wildlife, water and public health; help local communities most impacted by development and prepare for the day when boom turns to bust. Colorado does none of those things.

The situation here is even worse than that - a recent report from the state audit committee detailed a complex, opaque process that is riddled with the potential for fraud. The report concluded it was impossible to know if the state was being ripped off. Hard rock industries produce almost a billion dollars in revenue but pay a paltry $500,000 in severance taxes. Coal is taxed at 54 cents a ton – it is selling for over twenty dollars a ton. Oil and gas exports to the state are up 2000% from 1990 but we have idea what we will do once this resource is depleted and we are left to clean the mess left behind.

Colorado needs to create a new state royalty program - an Impact Fee. The fee would be assessed at 5% of the value of the hard rock minerals, oil, gas, and coal. It would create a multi- billion dollar investment fund to be used for three purposes:

1. Address the impacts mineral extraction on local communities. It would fund roads, schools, energy use, social needs and public health in communities directly impacted by the extractive industries.

2. Address the environmental problems caused by oil, gas, coal, and mineral development. This pool would mitigate the impacts on wildlife and big game animals. It would help to preserve land for recreation, hunting and angling. Finally it would serve as a fund of last resort to clean up any sites that are improperly abandoned.

3. A New Energy Fund. Revenues from fossil fuels are as limited as the resource. Colorado should establish a New Energy Fund to smooth the transition from a fossil fuel economy to New Energy Economy and make Colorado a world leader in clean energy. This pool could fund consumer rebates for weatherizing homes and installing solar and wind systems. It would fund renewable energy projects and create seed capital to attract New Energy Businesses.

The oil and gas industry is the most profitable in the world. The industry that tripled the amount charged for natural gas in the last five years, can certainly afford a few points to protect Colorado from the impacts of oil and gas development and prepare us for the day when the resource becomes depleted.

Colorado needs to take control of our energy destiny.