Blog Post

Eagle Ford Boosts Government Revenue across Southern Texas

Jan 17, 2014 | Daniel Raimi

Although the oil and gas industry has historically played a large part in the economies of many Texas regions, large portions of Southern Texas have never been major producers – until now.

Eagle Ford and Permian oil production (left axis) and natural gas production (right axis).

The Eagle Ford (pronounced by many as “Eagle-ferd”) shale formation, which forms a crescent around the southeast of San Antonio, has grown to produce more natural gas and nearly as much oil as West Texas’ Permian basin—the region that has led Texas’ production for decades.

Production from the Eagle Ford has occurred across a large swath of South Texas. Gonzales, DeWitt and Karnes counties, which lie roughly an hour’s drive east of San Antonio, have been major players in the Eagle Ford boom despite having little history of oil and gas production.

Well completions per year in Gonzales, DeWitt and Karnes counties.

For city and county governments in Gonzales and DeWitt counties (we were unable to arrange meetings in Karnes County), Eagle Ford production has been a boon to the local economy, and the effect on local government finances has been a net positive. However, some challenges exist for county governments experiencing substantial impact on their road and bridge infrastructure. In DeWitt County, for example, some roads have sustained major damage due to heavy truck traffic and the county has struggled to maintain them. The recent photo below of Cheapside Road in northern DeWitt County shows where heavy truck traffic has eroded pavement along the edges of the roadway.

Cheapside Road in DeWitt County.

Recently, the Texas state legislature passed a bill that will allocate roughly $225 million in severance tax revenue to counties to help manage these effects, and DeWitt County expects roughly $5 million in grant funding to address road maintenance. This allocation from the state represents a major shift in state policy, as Texas has historically kept 100 percent of severance tax revenues to fund statewide school operations and state government activities.

DeWitt County property tax rates (left axis) and revenues (right axis).

While, according to local government officials I spoke with, $5 million will not be enough to address all of the infrastructure needs in DeWitt County, it is a welcome first step. At the same time, revenues from property taxes have increased dramatically in DeWitt County, and revenues from property and sales taxes in neighboring Gonzales County have also increased substantially (Gonzales County imposes a sales tax, while DeWitt County does not). Figure 3 shows just how dramatically property tax revenues have grown in DeWitt County even as the county-wide property tax rate has fallen.

This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.