Marcellus Shale

Record Tax Revenue Is Latest Shale-Driven Good News for W. Virginia

Shale development has not only vaulted West Virginia to the status of having the fastest growing economy in the United States — it’s also driving record tax revenue in the state.

West Virginia Department of Revenue Deputy Sec. Dave Hardy told Inside Shale Tuesday that “historic” July state tax revenues were a whopping $32 million over budget. And he did not hesitate to give credit to record West Virginia Marcellus Shale production and related activities for the state’s enviable financial situation.

[T]he oil and gas industry is huge. … I’ve been here at the Capitol about 19 months now and the whole 19 months I’ve been here, every day I hear from our revenue forecasters about what an impact oil and gas is having on West Virginia.”

For perspective on West Virginia’s $32 million July budget surplus, Hardy noted that the state’s budget surplus for the entire past fiscal year was $36 million. As Hardy told Inside Shale:

“July 2018 was a historic month and we don’t use that term lightly here at the capitol. As you know, the folks here that I work with have been around here a long time and they’re experts on the subject. So, when they say we’ve had a good month, we’ve had a good month. We were $32 million dollars over budget in July and that’s just extraordinary…”

West Virginia oil and gas development generates tax revenue both directly — via severance and property taxes based on production that totaled more than $1.3 billion dollars from 2013 to 2017 — and indirectly via personal income and sales taxes. Hardy noted that record July revenue was driven largely by increases in the latter two tax revenue streams — meaning more people are working and spending the money they earn. These trends were put into perspective by a 2017 report that found that West Virginia had the highest economic growth of any state in the country in 2017.

That report shows West Virginia enjoyed a 6.84 percent increase in gross domestic product in 2017, as well as a 2.75 percent increase in personal income and a 1.3 percent decrease in its unemployment rate (down to 4.9 percent from 6.2 percent).

As Business Development Corporation of the Northern Panhandle Executive Director Patrick Ford told EID earlier this month, the driving force behind this growth was West Virginia’s growing shale industry,

“The growth in our GDP and economy has been driven by energy. Natural gas has given a rebirth to the value-added metal, energy, and chemical industry clusters, expanded our transportation logistics and health care industry clusters, cut our unemployment rate in half, attracted over $400 million of private investment, driven up worker pay rates to the highest levels we have seen since 2008, and fueled a construction industry that has our region growing construction jobs faster than other metro area in the country.”

These trends are particularly evident in major West Virginia shale counties.

Doddridge County – one of the highest natural gas and oil producing counties in the state – had an unemployment rate of just 3.2 percent this past June. The county also collected $15 million in ad valorem property taxes on oil and gas production last year, along with $1.67 million in severance tax revenue. Similarly, Wetzel County collected $15.36 million in ad valorem property taxes in 2017, along with $1 million in severance taxes. Those two counties combined for more natural gas production in 2016 (543,352,176 mcf) than the entire state produced in 2012 (539,860,487 mcf), and state natural gas production is on pace to more than triple in just six years, according to West Virginia Oil and Natural Gas Association data.

As WTOV reported earlier this month, Brooke and Hancock counties have seen shale-related employment opportunities grow dramatically this year. Strategic Business Manager Theresa Comisso told WTOV,

“Everyone who is working in this shale is local people putting money back into our economy. They live here, they work just like everyone else and when you go on all these sites, it’s amazing.”

“The jobs are here. You could go online and Google ‘oil and gas’ with a 50-mile radius, and people are hiring 30-40 people in a week and a half.”

Ford told WTOV,

“If you get into the weeds to find out exactly what that oil and gas job means… For every oil and gas job, we create, there is a spinoff of one to four jobs in the community because of that one job.”

Hardy also lauded the thousands of jobs created by two major pipeline construction projects in progress in West Virginia during his Inside Shale interview on Tuesday,

“We believe about 3,600 people [are working on those pipelines] – that’s jobs [that] were actually grown in the last twelve months as a result of the pipeline projects and the oil and gas industry.”

Hardy also noted the fact that the more than $110 million in severance taxes collected last year could double by 2023 as those pipelines come online and facilitate further production growth. He also emphasized the importance of the nearly $500 million in oil and gas property taxes collected from 2013 to 2017 — 70 percent of which go to fund local schools:

“In property taxes, maybe an element that no one thinks that much about, in oil and gas taxes – the property taxes for our local governments were $96.2 million dollars (in 2017). So, you see – in addition to the severance tax and a number of people working, there’s also a very serious property tax revenue stream that local governments enjoy.”

West Virginia’s surging economy and state coffers are just the latest example of the positive effects of shale development in the Appalachian Basin. And with needed midstream infrastructure build-out underway and exciting downstream projects on the tri-state Shale Crescent’s radar, it is clear why Hardy said he feels “very optimistic” about West Virginia’s future.

 

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