Report: Oil and Gas Benefits for Local Communities Can’t be Replaced

A new report from Resources for the Future (RFF) provides data demonstrating the financial benefits of fossil fuel energy production for local governments and communities. Notably, the report showcases that replacing fossil fuels with renewable resources would strip away millions in critical funding sources that families, businesses, and households rely on.  

To conduct this analysis, RFF gathered a dataset of around 40,000 observations of local government revenue from the energy system in 2021 including: the production, transportation and refining of coal, oil, and natural gas as well as electric generation from coal, natural gas, wind, and solar. The data spans 79 energy-producing counties across 10 states: Alaska, California, Colorado, Montana, North Dakota, New Mexico, Ohio, Texas, West Virginia, and Wyoming. The states were chosen based on their high levels of energy production.   

Oil and Gas Contribute Greatly to Local Communities 

RFF begins the report by plainly stating the facts: 

“[T]he decline of coal, oil, and natural gas will reduce government revenue.” 

‘Reduce’ is putting it lightly. Fossil fuels bring in hundreds of millions of dollars for local communities. In 11 of the 79 counties sampled, local governments receive over $100 million annually from fossil fuels. Large scale production counties like Weld County in Colorado and Alaska’s North Slope Burrough earned $527 million and $395 million respectively.  

Even with these high values from fossil fuels, RFF believes the numbers are underestimates 

“The true share of revenue from fossil fuels is likely higher, as our estimates exclude indirect revenues from sources such as permanent funds that are endowed exclusively by fossil fuels, along with other sources such as sales and income taxes, which also are likely dominated by fossil fuels.” 

Oil and Gas Cannot be Easily Replaced  

Across the globe, environmental activists have continued to push for an end to fossil fuels in favor of renewables – such as the administration’s recent moratorium on LNG exports – even as data has shown that a drastic loss of fossil fuel revenue would cause economic turmoil for places that rely on this revenue. RFF, however, shows that this is not possible in the most highly producing counties. RFF found that: 

“[F]ossil fuels generated more than $10,000 per capita in government revenue for 6 of our sample counties and more than $1,000 per capita for 28 counties.” 

Conversely, RFF points out that 

“The highest level of per capita revenue from wind and solar was roughly $1,000, and only 11 counties exceeded $100 per capita.” 

RFF continues in more detail explaining: 

“Among our 79 sample counties, the energy system contributes more than half of total property taxes in 22 counties, with 4 exceeding 90 percent. . . Fossil fuels are the dominant contributor and account for more than half of property tax revenues in 15 counties and more than 10 percent in 47 counties. Wind and solar contribute more than half of property tax revenues in just one county. . . and more than 10 percent in 8 counties.” 

Source: RFF  

 The amount of money generated by fossil fuels far exceeds the amount of money coming from renewables. This is not something that will easily change with increased renewable energy infrastructure. As explained in the report 

“[T]he scale and energy density of fossil fuel production, compared with the geographically dispersed nature of wind and solar means that these alternatives would need to cover implausibly large portions of fossil fuel–dependent counties to replace the revenues they currently generate.” 

It is well documented how various towns, cities and states benefit and rely on money from the oil and gas industry. Take New Mexico for example, who is utilizing booming oil revenue to pay for essential services like infrastructure and schools. Similarly, in Ohio, oil and natural gas industries were found to have invested over $100 billion dollars into the state between 2011 and 2021. In Texas, the oil and gas industry paid $26.3 billion in royalties and state and local taxes. This money helped pay for everything from public schools to first responders. Phasing out fossil fuels with renewables as an inadequate replacement will leave extreme funding gaps for fossil fuel revenue reliant localities. 

Bottom Line: While EID has discussed at length how oil and natural gas have a complementary relationship with renewables, simply replacing these sources is not a one-to-one solution. Fossil fuel revenue contributes millions to counties and ensures local governments can pay for essential services like schools, infrastructure, and community programs. The stripping away of critical oil and natural gas resources not only would threaten energy security and grid reliability, but it would rob governments of crucial funding.  

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