Report

Oil and Gas Revenue Allocation to Local Governments in Eight States

Abstract

This report examines how oil and gas production generates revenue for local governments in eight states through four key mechanisms: (i) state taxes or fees on oil and gas production; (ii) local property taxes on oil and gas property; (iii) leasing of state-owned land; and (iv) leasing of federally owned land. To compare across states, we show the percentage of total revenue generated by oil and gas production that flows to local governments from these revenue sources. We also connect these calculations to related research to assess whether state and local policies are providing sufficient revenue for local governments to manage increased costs associated with shale development. We find that in most cases, existing policies appear to provide adequate revenue for local governments to manage increased costs associated with growing oil and gas activity. However, additional revenue may be warranted for some local governments in highly rural regions experiencing rapid, large-scale development, notably the Bakken region of North Dakota and Montana, select counties in Texas, and select local governments in Colorado and Wyoming. Alternatively, collaboration between industry and local governments, especially on road repairs, could mitigate the need for additional revenues.

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