Royalties, taxes paid by Texas drillers plunged in 2016

By Lydia DePillis

Texas’ top oil and gas association said Tuesday that taxes and royalties paid to state and local government fell significantly in the last fiscal year, reflecting the plunge in oil prices and decline in drilling activity during that period.

Oil and natural gas producers generated a total of $9.4 billion in revenues for state, county and school district coffers in fiscal 2016, which ended August 31, according to the Texas Oil and Gas Association. That’s down nearly 40 percent from a peak of $15.7 billion in 2014 and 30 percent from  $13.8 billion in 2015.

 For perspective, that’s out of $111.3 billion in total state revenues, of which sales taxes provided $28.8 billion.

Texas has grown less dependent on both taxes and jobs from the fossil fuel industry in recent years, which allowed it to remain in relatively stable fiscal condition even as other large oil and gas producers like North Dakota, Alaska, and Louisiana suffered during a two-year oil bust that began in the summer of 2014.

Still, TXOGA president Todd Staples used the annual tabulation to trumpet the industry’s importance to the state’s economy, and press for the maintenance of a business climate that favors oil and gas production.

“What Texas needs now is for our lawmakers to look closely at what Texas needs to attract businesses,” Staples said on a conference call with reporters, naming adequate funding for the Railroad Commission, low taxes, and support for pipeline infrastructure as the association’s main priorities for the 2017 legislative session.

Staples also cited the oil and gas industry’s formidable workforce in Texas, which still enjoys higher-than-average wages, even though it has shrunk from more than 100,000 workers in November 2015 to about 92,000 employees today, according to the Dallas Federal Reserve.

The Comptroller’s office has forecast state oil and natural gas tax collections to rise 32.3 percent and 27 percent respectively in the coming two-year period as oil prices recover. Oil was trading above $54 a barrel late Tuesday morning, more than double the 13-year low of $26 reached just over a year ago.

But there are increasing concerns that while oil supply seems boundless, demand may be peaking as vehicles become more fuel efficient and alternative energy sources like wind and solar increase their share of electricity production. Meanwhile, advances in automation have decreased the rate at which the industry’s workforce needs will rise along with production.

“I don’t think anyone is forecasting the wide-open speed at which jobs were created, and revenues of 2014,” Staples said, “just because the global supply is so much, and demand is not growing as fast as it has in previous decades.”

Even though the state overall isn’t heavily dependent on oil and gas, some counties and school districts rely almost entirely on revenues from local production. For example, Karnes City Independent School District gets 87.1 percent of its revenues from the industry, and took a $6 million hit  last year — although it didn’t keep much of the revenue it took in during the boom times anyway, since the Texas’ school finance rules require excess collections to be sent back to the state.

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