Texas' budget benefits from shale development

Towns in the Eagle Ford Shale and other shale formations in Texas are benefiting from the oil and gas boom. The influx of oilfield workers and their families has created the need for more homes, hotels, medical facilities, educational institutions and basic domestic resources. These effects were examined in the Eagle Ford Shale Task Force Report, March 2013. Besides the local economies, shale development has created a windfall for Texas. Taxes on oil and gas development have soared past budget estimates. Oil and gas interests paid $7.4 billion in taxes in 2010, $9.25 billion in 2011, and $12 billion estimated in 2012. Severance tax income from oil production and regulation was 43% higher than estimated, at $2.1 billion, and the natural gas production tax was 38% higher than estimated, at $1.5 billion. The state’s Rainy Day Fund profits from these taxes, which funds can be used to pay for infrastructure projects, such as water. Currently the Fund has approximately $8 billion, but that is expected to rise to $11.8 billion in 2014-2015.

Another effect of the shale boom is the increase in property taxes collected by local governments. The amount collected from oil and gas interests is significant – about $3.6 billion in 2012. Sales tax from oil and gas totaled approximately $2.5 billion in 2012.

As the search for more oil and gas from shale formations continues, Texas will benefit from the lucrative exploration and development activity. Texas has the largest oil and gas field services sector in the nation. This sector includes among others, trucking, hydraulic fracturing fluid production, and drilling equipment. Everything bought by the energy companies and their employees is taxable so the local and state coffers will continue to benefit.

This article was prepared by Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.