New application fee for oil and gas operations aim at recovering costs

Making development pay its own way

The price of doing business in Gunnison County just got a little bit higher for oil and gas companies. The Board of County Commissioners agreed last week to begin charging application fees for oil and gas operations in Gunnison County. The decision comes in spite of a request from SG Interests I, Ltd. to hold off on implementation.

“We spend a lot of time [processing applications], and it’s our intent to make the development pay its own way,” commissioner Phil Chamberland explained to SG Interests operations and land manager Eric Sanford. Sanford appeared before the board on April 5, asking the commissioners to delay approval of the fees until he had time to review the numbers.
“I was not at the last meeting,” he said. “I apologize for that. Neither [SG Interests or Gunnison Energy] have any permits they are submitting in the next month, so there wouldn’t be any loss of money. It’s just time to review what you put together.”
The fees in question were developed based on an audit of the time it takes county staff to process the application for each level of classification. Assistant director of planning Neal Starkebaum walked the commissioners through the estimates at a March working meeting. Estimates ranged from $991.82 for an operation classified as No Significant Impact to $2,600.69 for review of a Minor Impact application and $4,423.26 for a Major Impact application.
“These are just salary hours; they do not include any other benefits associated with compensation to employees,” Starkebaum said. “It doesn’t include materials, copy and postage, and on occasion we do need consultation with the county attorney office, and it doesn’t include that.”
At the same meeting, county manager Matthew Birnie estimated that employee benefits would reflect an additional 20 percent to 30 percent in costs. In order to capture those missing costs, the commissioners rounded up on the staff calculations, suggesting application fees of $1,200 for review of No Significant Impact operations, $3,000 for Minor Impact operations and $5,000 for Major Impact operations.
“This is a bit higher than the two closest counties [Archuleta and La Plata], both charging $1,300 and $5,000 for minor and major projects,” said Starkebaum.
“With this detailed presentation and our conversation here, the rounding up to those fees is defensible,” commissioner Hap Channell said.
The commissioners consented to hold off on adoption of the fees, however, until Sanford had time to review them, provided there was a good faith understanding no new permits would be submitted. They revisited the matter two weeks later, on April 19, with Sanford back in attendance. He submitted a letter on behalf of SG Interests, stating that “SG Interests I, Ltd. does not specifically object to the dollar amounts of the proposed fee schedule, but we do have concerns with the application of these proposed fees.”
Sanford’s letter addressed concerns that review or consultation fees not included in the initial application fee, but left to the discretion of the county, could result in additional costs. He also suggested in his letter that a requirement that operations commence within one year of a permit’s issuance, and be completed within one year of commencement, are not always realistic—operations that take longer might incur the application fee more than once. He had additional concerns as well.
“You can read these numbers on face [value], but at this point I think it’s getting the cart before the horse when you consider there’s a proposal coming to you soon to rewrite No Significant Impact, Minor and Major impacts,” Sanford said. “I’d ask you to consider, because you’re setting the cart before the horse, not by anybody’s fault, that you suspend this decision until those categories are redefined.”
According to Channell, the county had received an additional letter that “brought up similar concerns about the subjectiveness of other kinds of costs or fees related to operations. My own opinion, and I understand what you’re saying, but I’m not quite as concerned about the possibility of horse and cart or cart and horse because I want to get this portion done and we can address the rest [later]. A lot of work was put into these fees, and they’re fair and accurate, and I will personally take your comments under advisement.”
“We cannot put off something we’ve been working on for a couple of years for something that may or may not come forward or may or may not be adopted,” commissioner Paul Swenson said, agreeing with Channell that Sanford’s concerns would be taken under consideration as appropriate. “Your letter was distributed throughout the community offices, so it will be a matter of record.”
“I’m in agreement, but I’m going to be very sympathetic to your concerns, when it comes down, from a business perspective,” commissioner Phil Chamberland added.
The commissioners formally adopted the schedule for new oil and gas application fees, effective immediately.