Depressed commodity prices and producer cutbacks are the order of the day, but it was only last year that Texas set a record for state/local taxes and royalties collected from the oil and gas industry.

Last year the industry in Texas paid a record $15.7 billion in taxes and royalties, according to data released Tuesday by the Texas Oil & Gas Association (TXOGA). The industry supported 41% of the state’s economy, up from 33% in 2013. Last year’s taxes and royalties total was more than double the amount paid by the industry in 2010, said TXOGA President Todd Staples.

“Despite decreased oil prices, Texas remains an oil and gas state, and the industry is central to our economy,” Staples said. “Back in 2012, when daily oil production was 1 million bbl a day less than today, the oil and gas industry paid a hefty $12.1 billion in state and local taxes and royalties. In 2009, the price of oil was around $60/bbl and Texas produced about a third of today’s oil production levels and produced significantly less natural gas. That year, Texas oil and gas industry paid $8.5 billion in state and local taxes and royalties.”

During the 2016-2017 biennium, revenue from oil and gas taxes should be a smaller contribution to state coffers than during the current biennium, according to a recent report from the state comptroller (see Shale Daily, Jan. 12). The Texas legislature is currently in session, and oil/gas interests in Austin are working to preserve the state’s severance tax incentive rate intended to stimulate production from unconventional wells (see Shale Daily, Jan. 12; Nov. 13, 2014).

“Even in years when oil and gas tax revenue doesn’t make history, state and local tax revenue from the oil and gas industry always makes a tremendous impact for the people of Texas,” Staples said.

The state’s Rainy Day Fund, Staples noted, is supported almost exclusively by oil and gas severance taxes and has been used to support public schools, children’s health insurance and economic development initiatives (see Shale Daily, Oct. 9, 2013). Last year, voters approved directing billions in oil and gas tax revenue toward Texas highways (see Daily GPI, Nov. 5, 2014). Voters also approved using $2 billion from the fund for the state’s water plan. Oil and gas royalties and leases also provide for the Permanent School Fund, which supports Texas public schools.

Beyond taxes and royalties, oil and natural gas activity supports 41% of the Texas economy as measured by gross state product, Staples said. “The oil and gas industry creates an economic ripple effect, with every direct oil and gas job creating additional jobs in supporting industries. Because the oil and gas industry invests in goods like pipe and machinery and services such as construction and engineering, the economic multiplier associated with oil and gas production is tremendous.”

A typical job in petroleum refining, for example, drives another 26 jobs in other sectors across the Texas economy, he said. In 2014, the oil and gas industry directly employed 418,000 Texans, with indirect economic gains resulting in another 1.8 million Texas jobs in supporting industries and sectors. “More than 2.2 million Texans have a job that’s a result of oil and gas activity in our state,” Staples said.

Meanwhile in neighboring Louisiana, the state budget is facing a $1.6 billion shortfall this year, and declining revenues from taxes on oil and gas industry activity aren’t going to help, Louisiana Oil & Gas Association President Don Briggs, wrote in his latest editorial on the industry.

“For every dollar that the price of a barrel of oil drops, the state budget loses $12 million,” Briggs wrote. “Holes in the state budget, for example, will mean cuts to higher education and healthcare. Drilling down a step deeper, this can mean professors losing jobs, classes not being offered, hospital clinics being shut down, and medical staff being reduced at state institutions.”