{"id":27147,"date":"2013-04-30T12:53:47","date_gmt":"2013-04-30T17:53:47","guid":{"rendered":"http:\/\/stateimpact.npr.org\/texas\/?p=27147"},"modified":"2013-04-30T12:53:47","modified_gmt":"2013-04-30T17:53:47","slug":"shale-boom-has-major-impact-on-texas-budget","status":"publish","type":"post","link":"https:\/\/stateimpact.npr.org\/texas\/2013\/04\/30\/shale-boom-has-major-impact-on-texas-budget\/","title":{"rendered":"Shale Boom Has Major Impact on Texas’ Budget"},"content":{"rendered":"

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Photo by MIRA OBERMAN\/AFP\/Getty Images<\/p>

The rise of drilling techniques like hydraulic fracturing, or "fracking," has led to new economic prosperity in Texas. (Photo of a Cabot natural gas drill at a fracking site in Pennsylvania.)<\/p><\/div>\n

From the Texas Tribune:<\/a><\/em><\/h4>\n

The\u00a0impact of the recent boom in shale drilling <\/a>is hard to miss in some remote Texas towns, where hotels and homebuilders scramble to keep up with the influx of oil and gas workers.<\/p>\n

But the most significant effect from the boom may be seen in the state\u2019s coffers. Taxes on oil and gas production have soared past estimates from the state\u2019s comptroller\u2019s office for fiscal 2012. And with production expected to continue to rise over the next several years, the economic benefits will continue.<\/p>\n

James LeBas, a fiscal consultant who also works as a lobbyist for the Texas Oil and Gas Association, estimates that oil and gas interests paid about $12 billion in taxes in Texas in fiscal 2012, up from $9.25 billion in 2011 and $7.4 billion in 2010. That included taxes on property, sales and production, as well as the franchise tax and indirect items like taxes on motor fuels.<\/p>\n

\u201cIt would be unambiguously positive for the state fiscal situation and local [economies], if oil production continues to rise,\u201d LeBas said. \u201cFor most of my lifetime, it has been falling.\u201d<\/p>\n

Driven by high oil prices and advanced rock-breaking technologies, oil production indeed appears set to rise. Barry Smitherman<\/a>, the chairman of the Texas Railroad Commission, said in a January interview that Texas could roughly double its oil production, to 3 million barrels per day by 2020. (The state currently produces about 1.7 million barrels of oil a day.)<\/p>\n

\u201cThese are OPEC-like numbers,\u201d Smitherman said, adding, \u201cWe\u2019re producing so much oil and gas in Texas that we\u2019re rapidly getting to the point where America can reduce its dependency on imported oil.”<\/p>\n

Last fiscal year, oil and gas production taxes \u2014 also known as severance taxes \u2014 came in far above the comptroller\u2019s estimates (which are known to be conservative). Tax income from oil production and regulation was 43 percent higher than estimated, at $2.1 billion, and the natural gas production tax brought in $1.5 billion, 38 percent higher than estimated.<\/p>\n

The production taxes are perhaps the most visible of the payments made by oil and gas. That\u2019s because this type of tax fuels the state\u2019s Rainy Day Fund<\/a>, which lawmakers are currently considering tapping to pay for infrastructure projects like water. The fund has about $8 billion, and that number is projected to rise to $11.8 billion by the end of the 2014-15 biennium, according to the comptroller\u2019s office.<\/p>\n

Property taxes, which go toward local governments, are also significant \u2014 about $3.6 billion was collected from oil and gas interests in 2012, roughly equivalent to the amount of oil and gas production taxes that year. Sales taxes from oil and gas totaled $2.5 billion in fiscal 2012.<\/p>\n

The recent breakneck growth may calm slightly in fields like the Eagle Ford Shale, analysts say. That\u2019s because the pumpjacks often bring up oil the fastest shortly after the wells are drilled, and then the pace slows down in later years. In the Eagle Ford, \u201cour expectations [are] for production to continue to grow through the decade but at a much slower rate,\u201d Stephen Richardson, a Deutsche Bank research analyst, said in an email.<\/p>\n

Still, with oil prices relatively high, at $90 a barrel, the search for more oil and new shales is in full swing. From the perspective of the state budget, exploration can be an especially lucrative activity, according to Dale Craymer, president of the Texas Taxpayers and Research Association.<\/p>\n

\u201cThe search for oil is a huge jobs creator,\u201d Craymer said. \u201cIt\u2019s also a huge tax creator.\u201d<\/p>\n

Companies exploring for oil may buy heavy equipment to drill, and that means sales tax revenues for the state.<\/p>\n

\u201cAlmost everything they buy is taxable,\u201d LeBas said, citing as an example a diamond-tipped drill-bit that can go for $40,000.<\/p>\n

Higher oil prices, though they hurt Texans at the gas pump, remain a net benefit to the state\u2019s economy, according to Mine Y\u00fccel, a vice president and senior economist at the Federal Reserve Bank of Dallas.<\/p>\n

\u201cWhen oil and gas prices go up, for the nation \u2014 that\u2019s costly,\u201d Y\u00fccel said. \u201cThat hurts the nation overall. \u2026 For Texas, it\u2019s the other way around.\u201d<\/p>\n

Some industries, of course, benefit from low fossil fuel prices. The petrochemical industry, for example, has enjoyed a boom thanks to low natural gas prices, which have slipped considerably from 2008 highs.<\/p>\n

The Texas economy is not as dependent on oil as it once was. In 1981, just before oil prices began a steep slide after their highs in the 1970s, oil and gas accounted for 18 percent of the state\u2019s GDP. In 2011, it was just above 8 percent.
\n<\/strong><\/p>\n

The slide hurt the state\u2019s economy, which has diversified since then. Still, a 2011 report from the Dallas Fed found that a 10 percent rise in oil prices leads to gains of 0.5 percent for the state\u2019s GDP.<\/p>\n

With the national shale boom on, Texans are also in demand to work on oil and gas drilling in other states, Y\u00fccel noted. Texas has the largest oil and gas field \u201cservices\u201d sector \u2014 like trucking and hydraulic fracturing fluid production that support the drillers themselves. It\u2019s \u201cmuch, much higher than the rest of the nation,\u201d she said.<\/p>\n

Texas Tribune donors or members may be quoted or mentioned in their stories, or may be the subject of them. For a complete list of contributors, click here<\/a>.<\/em><\/h5>\n
This article originally appeared in The Texas Tribune<\/a> at http:\/\/www.texastribune.org\/2013\/04\/30\/texas-shale-boom-brings-budget-benefits\/<\/a>.<\/em><\/h5>\n","protected":false},"excerpt":{"rendered":"

From the Texas Tribune: The\u00a0impact of the recent boom in shale drilling is hard to miss in some remote Texas towns, where hotels and homebuilders scramble to keep up with the influx of oil and gas workers. But the most significant effect from the boom may be seen in the state\u2019s coffers. Taxes on oil […]<\/p>\n","protected":false},"author":143,"featured_media":21611,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[59],"tags":[15,22,21],"acf":[],"_links":{"self":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/27147"}],"collection":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/users\/143"}],"replies":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/comments?post=27147"}],"version-history":[{"count":0,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/posts\/27147\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media\/21611"}],"wp:attachment":[{"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/media?parent=27147"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/categories?post=27147"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateimpact.npr.org\/texas\/wp-json\/wp\/v2\/tags?post=27147"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}