Unconventional Oil and Gas Revenues to Local Governments

/ Series: State Energy Policies

This report includes seven major energy-producing states and a new interactive adds four more (AR, LA, and PA). The study and interactive compare how local governments receive production tax revenue from unconventional oil and natural gas.

  • Horizontal drilling and hydraulic fracturing technologies require many wells to be drilled on a continuous basis to maintain production. This expands potential employment, income, and tax benefits, but also increases public costs.
  • Local governments, which bear the greatest impacts of energy production, rely on energy revenues to help them mitigate impacts and plan for long-term economic development.
  • Mitigating the impacts of drilling activity requires that revenue is available in the amount, time, and location necessary to build and maintain infrastructure and to provide services.
  • Managing volatility over time and making long-term investments in communities requires different fiscal strategies, including setting aside a portion of oil revenue in permanent funds.

map of states whose energy policies were analyzed

Windfall or Missed Opportunity?

This report (PDF) along with an updated interactive compare how local governments receive production tax revenue from unconventional oil extraction across ten major oil and natural gas producing states: Arkansas, Colorado, Louisiana, Montana, New Mexico, North Dakota, Pennsylvania, Oklahoma, Texas, and Wyoming.

The goal is to show how well each of the states returns oil and natural gas production tax revenue to local governments to help them mitigate impacts and plan for long-term economic development. We also provide specific reports for seven of the states in the above toolbar.

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

Fiscal policy is important for local communities for several reasons. 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 and making long-term investments in communities requires different fiscal strategies, including setting aside a portion of oil revenue in permanent funds.