While oil and gas companies took huge hits during the 19-monthenergy price crash between 1997 and early 1999, one silver liningwas the effectiveness of government incentive programs in assistingthe beleaguered industry, said the Interstate Oil and Gas CompactCommission (IOGCC). The findings were drawn from an IOGCC reportpublished last week titled Against the Wind: The Economic Impact ofIncentives during the Oil Price Collapse.

In the report, the IOGCC concluded that states, which provide atotal of $2.5 billion in incentive funds to the energy industryduring the course of the collapse, received more than $9 billion inincreased state and local taxes — a yield of more than $2 forevery dollar invested. In terms of overall economic effect, theIOGCC said the states’ $2.5 billion investment pumped 30 times thatmuch into the economy. Also, the incentive programs’ indirecteffects created 630,000 jobs and $14.8 billion in salaries.

“While generally unable to overcome the effects of a disastrousprice fall, the only successful countermeasures against the globalprice volatility have been the development of incentive programs toassist the oil and gas industry,” the report said.

The study included all incentive programs that could bequantified. The report breaks them down into 151 programs in 24states that required investment action and 44 programs in 20 statesthat provide tax relief without a specific investment. Of thetotal, there were 48 incentives directed at oil only, 24 at gasonly and 123 directed at both. Alaska, Kansas and Louisiana alltied for the title of state with the most programs with 13. Texaswas a close second with 12.

Overall, the study estimated the effects of the price collapsecaused a $60 billion loss to the 28 producing states included. Themore than 141 million people living in those states lost theequivalent in economic power of $424 each. Collectively, oil andgas producers, explorationists and drilling companies lost $2billion/month in revenue streams compared to October 1997.

Interestingly, the report said that the gas price decline, whichwas smaller percentage-wise than the oil price drop, actuallycreated greater drains on anticipated company revenue. More than$30.6 billion was pulled from the producing states by the gasdecline, showing that the collapse was as damaging to gas as it wasto oil, the report said.

For more information about the study, or to view it online, visitthe IOGCC’s publications page on its web site at www.iogcc.state.ok.us.

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