Study: Shale Development Boosts Tax Revenues for Local Governments

According to a new Duke University study, record oil and gas production due to shale development has led to substantial revenue generation for local governments in Arkansas, Colorado, Louisiana, Montana, North Dakota, Texas, Pennsylvania, and Wyoming. Key findings of the study show that school districts, counties and municipalities were the greatest beneficiaries of revenue generated from shale development:

“School districts tend to see the largest share of revenue from oil and gas production, with local property taxes providing operating funds for schools in AR, CO, TX, and WY, and various revenue streams providing revenue for school trust funds-endowments that help ensure long-term revenue for schools – in CO, MT, ND, TX, and WY.”

On revenue distribution for counties, the report states that:

“Counties tend to receive the second largest share of revenue, particularly in states where counties are allowed to tax oil and gas property…”

The study is the second in a series of publications undertaken by the Duke University Energy Initiative on Shale Public Finance. The Center previously reported on the net fiscal impacts for local governments that saw a boom in oil and gas production, which was primarily driven by shale development. The study concluded:

“Our research indicates that the net impact of recent oil and gas development has generally been positive for local public finances in the regions we examined.”

The new Duke University study breaks down shale development related revenue for local governments through four approaches:

  1. State taxes or fees on oil and gas production that flow through to local governments
  2. Local property taxes on oil and gas property
  3. Local government revenue from leasing of state-owned land
  4. Local government revenue from leasing of federally-owned land

What’s important to note here – besides what the researchers did include in their research methods – is what they did not include. Even with the significant benefits cited, the researchers explain that they actually excluded other sources of revenue:

“This report does not include corporate income taxes, which generally flow to state funds, nor does it include revenues from leasing local government land, as these data are not available on a state-wide basis for any of our eight states. We also do not include local sales tax revenue indirectly induced by economic activity associated with oil and gas development.”

These exclusions are critical sources of local and state tax revenue.  For example, according to the Texas Comptroller of Public Account’s transparency website, sales tax alone accounts for more than half of all Texas’ state tax revenue. Combine that with corporate income taxes paid by oil and gas companies and revenue generated from leasing local and state government lands, and you have billions of dollars in taxes that the report does not even address. According to S&P Capital IQ, from 2007 to 2012, ExxonMobil, Chevron and ConocoPhillips combined to pay $289 billion in corporate income taxes.

Today, shale development has become a powerful engine of the U.S. economy – driving our nation forward and making significant contributions along the way to local communities, school districts, counties and municipalities, not to mention creating millions of jobs for hardworking Americans.


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