Texas Oil Policy: Low Taxes, No Permanent Savings to Offset Volatility

/ Series: State Energy Policies

This report compares how Texas provides local governments with production tax revenue from unconventional fossil fuel extraction compared to other major energy-producing states.

This report (PDF) along with an updated interactive shows how Texas’s local governments receive production tax revenue from unconventional oil extraction.

Fiscal policy is important for local communities for several reasons.  This analysis shows that many communities are not receiving the resources necessary to manage impacts during the boom or to ensure resources are available after the boom. The Texas report is part of a larger series that looks at seven states: Colorado, Montana, New Mexico, North Dakota, Oklahoma, Texas, and Wyoming.

The focus on unconventional oil is important as horizontal drilling and hydraulic fracturing technologies have led a resurgence in oil production in the U.S. Unconventional oil plays require more wells to be drilled on a continuous basis to maintain production than comparable conventional oil fields. This expands potential employment, income, and tax benefits, but also heightens and extends public costs.

Mitigating the acute impacts associated with drilling activity and related population growth requires that revenue is available in the amount, time, and location necessary to build and maintain infrastructure and to provide services. In addition, managing volatility over time requires different fiscal strategies, including setting aside a portion of oil revenue in permanent funds.