Energy-tax changes may hurt tribes

Utah's Ute and Navajo tribes have a stake in the way the state taxes oil and gas drilling — they have an agreement with the state to use funds from reservation drilling to revitalize their land.

The Navajo Revitalization Fund has been used for projects such as housing and infrastructure improvements. The Uintah Basin Revitalization Fund has been primarily used to build government buildings for the Ute Indian Tribe, and in Duchesne and Uintah counties.

Smiley Arrowchis, vice chairman of the Ute council, said the program "folds into our overall economic development programs. . . . It is very important one that we place a pretty high value on."

The revitalization fund has helped construct facilities such as a Head Start center, educational buildings and a recreational center at Uintah Basin, according to fund manager Keith Burnett.

In 2004, nearly $1.2 million was approved for such projects with a total cost of about $2.3 million on the Navajo reservation. Uintah Basin projects, meanwhile, received $413,104 for projects with a total cost of about $2 million.

In SB191, the state Legislature this year made some changes to the severance tax code and is studying the tax burden on drilling companies. Tribal leaders have expressed some concern that by changing the tax code, the state would be changing their original agreement, according to John Harja, board chairman of the revitalization funds, and a representative of the governor's office.

Arrowchis said while he does have some concerns, they aren't "deep rooted, earth-shattering concerns."

Sen. Beverly Evans, R-Altamont, who chairs the Native American Legislative Liaison Committee and sponsored SB191, said future changes to the code could help the tribes and the gas and oil companies.

"One of the things we don't have in this state is a good tax policy on oil and gas," Evans said. "We need to have some good oil and gas (tax policy) . . . so companies can know what they can plan on."

Evans said for now, she'll focus on continued study of the impact of SB191 and on educating lawmakers about the tax policy.

The reworking of the tax code was prompted by a Utah Supreme Court ruling last year that said the tax must be based on the value of oil and gas "in the immediate vicinity of the well, with the oil and gas remaining in a natural state."

ExxonMobil Corp. had sued Utah and the state Tax Commission, saying the policy of basing the tax on the "point of eventual sale" was unfair.

Burnett said five member governing boards oversee the funds from the tax on oil and gas drilling, as well as mineral leases to fund "brick and mortar projects." The funds can't be used for general operating budgets, salaries or private businesses, he said.

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E-mail: dbulkeley@desnews.com