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An extensive report by Headwaters Economics, an independent regional research organization, recommends that Wyoming follow Alaska’s example to revamp its severance tax formula and direct additional tax revenue to the counties and communities where most mineral extraction takes place…

In the 62-page report, Impacts of Energy Development in Wyoming, with a Case Study of Sweetwater County, authors Julia Haggerty and Mark Haggerty argue Wyoming’s current formula distributes only a small percentage of the severance tax it receives to the local governments where the energy impact is greatest.

“Wyoming has the least favorable tax structure on oil and natural gas of anyone in the inter-mountain west,” Mark Haggerty said in an interview with WyoFile, “and yet, it’s the center of drilling activity.”

The report disputes the widespread notion that Wyoming’s counties and municipalities receive big bucks from energy development in their backyards.

“Despite the high production value of extraction in Sweetwater County,” the authors conclude, “return to the county through state severance taxes is a small part of total county revenue.” Following Sublette and Campbell County, Sweetwater is Wyoming’s third-highest producer of mineral revenue.

Yet, according to the report, Sweetwater isn’t getting much back:

“In 2007, state severance tax distributions (to Sweetwater County) of $444,866 made up seven percent of intergovernmental revenue, or ten percent of total revenue. Across Wyoming, the state returns only a small portion of total revenue to local governments (seven percent to counties and one percent to cities and towns in 2008 or $196 million and $25 million respectively).”… (more…)

By Mark Haggerty and Julia Haggerty, Ph.D., Headwaters Exonomics— The Obama administration has proposed eliminating several federal tax breaks for the oil and natural gas industry. This raises an important question: Do tax incentives influence oil production? At a time of both record budget deficits and energy industry profits, both Montana and the federal government should look to the experience of other states for answers.

Many states are especially reliant on revenue from oil and natural gas. According the U.S. Census of Governments, severance taxes accounted for 74 percent of all state tax revenue in Alaska, 34 percent in Wyoming, and 9 percent in Louisiana in 2010. This reliance encourages close attention by states to the assessment of the impacts of rates and incentives.… (more…)

This week Wyoming’s congressional delegation cheered the demise of a bill that would have cut some tax breaks to the top five oil companies, a measure estimated to bring in $21 billion in revenue over the next 10 years..…

A 2008 analysis by Headwaters Economics — a Montana-based non-profit whose supporters include the U.S. Bureau of Land Management and the Montana Legislature — found that states with lower tax rates didn’t necessarily attract more rigs or produce more gas. Instead, drilling and production was based more on commodity prices and where quality resources are located.… (more…)

“Fossil Fuel Extraction and Western Economies” compares the importance of the fossil fuel economy in the five Rocky Mountain energy-producing states–Colorado, Montana, New Mexico, Utah and Wyoming–and analyzes the relative success that states and communities have had in maximizing benefits and minimizing the costs of energy development.

Written by Julia Haggerty, it makes three key findings at the state level:

• Fossil fuel extraction plays a limited role in state economies, and energy-related jobs (except for Wyoming at 8.5 percent), providing less than 3 percent of both total employment and total personal income for other states.
• Price — not policy — is the primary driver of oil and gas development activity, making it highly volatile. Employment and income from mining, including energy development, in the five-state region follow commodity price trends, and income compensation from mining shrank by the largest percent–16.1 percent from 2008 to 2009–of any economic sector.
• Tax revenue from fossil fuel extraction–rather than jobs–is the longest-lasting economic legacy of fossil-fuel development. While energy revenue varies because of price volatility, it continues to accrue long after most jobs have left a region. By maximizing collection of fossil-fuel revenue and ensuring it is adequately distributed, states increase the benefits of energy development, while minimizing, or at least covering, the costs.…

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…Anytime coal’s cost to America is discussed, the coal industry reflexively talks about what an economic lifeline it is for the states in which it operates. Headwaters Economics, a Bozeman-based think tank focusing on natural resource issues, has a solid new study that’s getting national attention for undercutting those claims. For instance, the Headwaters study finds that “fossil fuel production has not insulated energy-producing states from fiscal crisis,” that “fossil fuel extraction has a limited influence at the state level on economic indicators such as GDP by state, personal income, and employment,” and that “the volatility of fossil fuel markets poses obstacles to the stability and long-term security of economic growth in energy-producing regions.”… (more…)

…So how have Western states handled the latest 2003-2008 boom and bust? Have we gotten smarter about handling booms, or did we do what we did the last time?

The answer, according to a new study by Headwaters Economics, is it depends on the state, the counties, the fuel and the presence, or absence, of political and industrial leadership at the right time and place.

The core finding was that tax revenues have greater impact and sustainability than highly volatile energy jobs, which can vanish as fast as they appear.

“Fossil Fuel Extraction and Western Economies” compares the importance of the fossil fuel economy in the five Rocky Mountain energy-producing states–Colorado, Montana, New Mexico, Utah and Wyoming–and analyzes the relative success that states and communities have had in maximizing benefits and minimizing the costs of energy development.

Written by Julia Haggerty, the report makes three key findings at the state level:

• Fossil fuel extraction plays a limited role in state economies, and energy-related jobs (except for Wyoming at 8.5 percent), providing less than 3 percent of both total employment and total personal income for other states.
• Price–not policy–is the primary driver of oil and gas development activity, making it highly volatile. Employment and income from mining, including energy development, in the five-state region follow commodity price trends, and income compensation from mining shrank by the largest percent–16.1 percent from 2008 to 2009–of any economic sector.
• Tax revenue from fossil fuel extraction–rather than jobs–is the longest-lasting economic legacy of fossil-fuel development. While energy revenue varies because of price volatility, it continues to accrue long after most jobs have left a region. By maximizing collection of fossil-fuel revenue and ensuring it is adequately distributed, states increase the benefits of energy development, while minimizing, or at least covering, the costs.…

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A report released Tuesday by a Montana-based research group said the economic impact of the fossil fuels industry comes from tax revenues, not energy-related jobs for workers who can be transient, and it recommended maximizing those revenues by raising rates.

The Headwaters Economics report recommended setting aside money to deal with environmental impacts and reforming distribution of energy revenue so that money goes not only to communities affected by mining or drilling but also to those flooded with industry workers.… (more…)

…A report Tuesday by a Montana-based research group said the economic impact of the fossil fuels industry comes from tax revenues, not energy-related jobs for workers who can be transient, and recommended maximizing those revenues by raising rates.

The report by Headwaters Economics said government data show energy-related jobs including coal mining jobs made up less than 3 percent of the total employment in Colorado, Montana, New Mexico and Utah and about 8.5 percent in Wyoming in 2008…

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…Proper tax and other policies can help both states and local governments maximize the benefits of fossil-fuel development while minimizing the challenges posed by its volatility, a new report concludes.

The report, released by the Montana-based Headwaters Economics nonprofit research group, points to both Colorado policies, and more specifically those in Garfield and Mesa counties, to make its point.…

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…The inability of land managers to allow wildfires to burn out naturally in Colorado is not surprising. Amongst the states in the Rocky Mountain West, Colorado has the largest portion of developed forested private land bordering public wildlands — 21 percent — according to independent nonprofit research group Headwaters Economics. New Mexico ranks second to Colorado in terms of wildland-urban interface development, with 17 percent of its interface area occupied by housing. Nine percent of Montana’s wildland-urban interface is developed, while Wyoming is least developed at just four percent…

In a detailed analysis of daily fire suppression costs for 18 large fires in Montana during 2006 and 2007, Rasker found that when it was 1 degree warmer on average during summer the cost of protecting homes from fire doubled…

In a 2009 report, Rasker identifies 10 possible solutions to curb the federal costs of fighting fires on the wildland-urban interface in the West. These include limiting development with local zoning ordinances and cutting federal firefighting budgets in order to shift more of the cost of wildland firefighting to local governments.

“We’re not telling people that they shouldn’t live where they want,” said Rasker. “What we’re saying is that the cost accountability simply isn’t there right now.”… (more…)

…A new study released this month by Headwaters Economics, of Bozeman, Mont., shows how much communities around national parks like Teton County benefit. The local areas around Yellowstone have 5,155 jobs tied to the national park with visitors spending $302 million in 2009, the Headwaters report by economist Ray Rasker shows.… (more…)

By Julia Haggerty, Ph.D., Headwaters Ecoinomics— The Obama administration’s decision to take a “fresh look” at oil shale policy and regulations is sound public policy that will benefit the future viability of commercial development in the long-term.

Today, the commercial feasibility of proposed oil shale development remains tenuous due to a number of technical, environmental, regulatory and economic challenges.

A formal, nonbiased review is needed for a number of reasons.… (more…)

…Recreation and tourism are not just for fun; for many states, they are big business, providing much needed jobs and tax revenue. As resource dependent industries, however, they are also highly vulnerable to the impacts of climate change.

A recent report by Headwaters Economics details the effects of climate change on downhill skiing and recreational fishing in Montana. In this region, the “crown of the continent”, the majority of jobs, population and income growth over the last three decades have been tied to the natural amenities and resources of the region. Though small relative to the size of Montana’s economy, the report notes that these industries are closely tied to the “quality of life” that attracts businesses, residents, and tourists to the region.… (more…)

…Among the many issues raised for states by the rapid development of fossil fuels, like the burgeoning Marcellus Shale gas boom in Pennsylvania, are two pressing fiscal issues: first, how to raise funds fairly from industry activities; and second, how to distribute these funds to mitigate local impacts while investing in economic growth.

Today, Pennsylvania is the only major natural gas state that lacks a severance tax. A loophole in state law also excuses natural gas development from local property taxes. The absence of these two critical revenue streams denies Pennsylvania the opportunity to apply the lessons of recent energy booms in the American West…

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By Mark Haggerty, Headwaters Economics— U.S. Agricultural Secretary Tom Vilsack just announced that this year’s ‘transition’ payments to counties from the Secure Rural Schools and Community Self-Determination Act (SRS) will again ‘contribute to rural communities becoming self-sustaining and prosperous.’

The Secretary stressed that these payments ($389 million) fund local roads and schools—important for communities still feeling the after-effects of the recession. They do much more.

In the West, federal spending is important, but equally so are federal public lands. How SRS payments are funded and distributed is a key factor in determining how public lands are managed, and the kinds of jobs available in rural communities.… (more…)

By Julia Haggerty, Ph.D., Headwaters Economics— Fossil-fuel booms such as the one surrounding the Marcellus Shale in Pennsylvania raise two pressing fiscal issues for states: how to raise revenue fairly from industry activities, and how to distribute it effectively. But Pennsylvania is the only major natural-gas state without a severance tax, and a loophole in state law also excuses gas developers from local property taxes. The absence of these revenue streams will prevent Pennsylvania from applying the lessons of recent energy booms in the American West.

Headwaters Economics, an independent, nonprofit research group based in Montana, has studied energy and fiscal policy at the county and state levels. Our research shows how Pennsylvania could avoid the mistakes of other states and benefit from its natural-gas supplies…… (more…)

Op-Ed by Ray Rasker, Headwaters Economics— As the West boomed, the role of commodity production in the overall economy shrank. From 1990 to 2008, farming, ranching, forestry, lumber and wood products manufacturing, hard rock mining and fossil fuel development cumulatively contributed less than 3 percent of all new jobs across the West.

In 2008, these sectors combined constituted roughly 7 percent of all jobs in the rural West, and 3 percent in the West as a whole.

Within this economic context, our research sought to explain differences in county economic performance. Specifically, we examined factors such as population growth, the timber industry, education rates, government jobs, and the change in county unemployment rates from November 2007 (just before the recession officially started) to November 2009.

We documented a relationship between the size of the boom and the size of the bust. The faster an area’s population grew from 2000 to 2007, on average, the faster the area tended to lose jobs during the recession.

Similarly, those counties doing poorly at the start of the recession were more likely to continue to do poorly and lose jobs at a relatively faster rate.

Second, counties that were more timber dependent lost jobs at a faster rate during the recession. As in the past, specialization in resource extraction left counties vulnerable to sudden changes in commodity prices and in this case the housing market’s decline.

Third, a county’s education rate (the percent of adults with a college degree) was positively associated with lower rates of job loss. This finding is consistent with the Bureau of Labor Statistics’ projection that future jobs expected to be in highest demand will require a college degree.… (more…)

By Ben Alexander, Headwaters Economics— Debate over a possible new national monument covering the Otero Mesa has erupted again. Given the importance of this issue, now is the time to discuss the economics of how a monument could impact southern New Mexico and whether it would be beneficial to residents.

Let’s start with the area’s economy. The region’s economy has strong ties to the military, though since the mid-1980s these jobs have been declining. In contrast, services and professional sectors and retirement and investment income have grown independent of this decline and provided a complimentary economic alternative to military bases.… (more…)

By Mark Haggerty, Headwaters Economics— …Oregon’s public lands, some of America’s most spectacular, provide tremendous economic value through timber, salmon, and recreation, while providing a high quality of life that attracts people and businesses to the state.

To provide for sustained long-term growth, Oregon must take advantage of all of the integrated economic and fiscal benefits — timber but also the water, wildlife and scenery — provided by its federal lands.

One key component of leveraging these diverse forest values into growth is to ensure that federal payments (PDF) to the state’s counties for nontaxable lands continue to provide stable benefits for local schools and governments

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