Blog Post

Government Revenue, Road Repair Needs Surge in NW Oklahoma

Dec 22, 2014 | Daniel Raimi

Oil and gas production has surged since 2010 across northwest Oklahoma, our first stop on this round of travel to research the impact of shale development on local government finances.

Oil and gas production in Alfalfa, Grant, and Woods Counties, Okla. Data source: DI Desktop.

This increased production has led to substantial population and economic growth in rural Alfalfa, Grant, and Woods counties. This growth in turn has driven substantial increases in local government revenues from sales taxes, property taxes, allocations from Oklahoma’s severance tax (called the Gross Production Tax) and other sources.

Despite challenges, all three counties describe the increase in oil and gas development as positive for local government finances. A common sentiment among county officials is that the growth in oil and gas development has been positive for government finances, except for road maintenance and repair funding.

At the same time, county governments have struggled to keep pace with the demand for road repairs associated with heavy industry truck traffic. Most county roads in this part of Oklahoma are unpaved, and thousands of truck trips are required to complete each new well. In addition, limited local pipeline infrastructure means that much of the oil produced in the region must be hauled by trucks from well sites to local storage tanks, adding still more local traffic.

Damage to an Alfalfa County road

In some cases, oil and gas companies make road repairs or supply local governments with repair materials. However, these in-kind donations are irregular and informal, and have not been sufficient to make needed repairs, which officials in Alfalfa County estimate would cost more than $100 million for their county alone.

County roads in Oklahoma are funded through several sources, but do not have access to the county’s largest revenue source: ad-valorem property taxes. As a result, the growth in property values across these counties has benefited school districts, law enforcement, and other services, but funding for roads remains insufficient.

Local governments have also struggled with workforce retention, as high-paying opportunities in the oil and gas sector have made it difficult to retain road crew and law enforcement staff. As a result, they have increased salaries and other benefits substantially.

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