|
IOGCC report shows states reaping huge returns from oil, gas incentives Study found that producing states suffered $60 billion loss from combined effects of falling oil prices, falling gas prices, decline in drilling activity Petroleum News Alaska
A study released in early December by the Interstate Oil and Gas Compact Commission shows that government-supported incentives for oil and gas production have yielded huge returns on investments for states.
The report, “Against the Wind: The Economic Impact of Incentives during the Oil Price Collapse,” concludes that states, which provided a total of $2.5 billion, received more than $9 billion in increased state and local taxes — a yield of more than $2 for every dollar invested.
The report examined all state incentives that could be quantified. Those programs resulted in investments of $18.6 billion by the industry to participate in incentives such as drilling or work-over activities. Resulting hydrocarbon production was valued at $53.6 billion.
“In a larger sense, the tax revenue stream pales in comparison to the beneficial effects on the economy,” the report states.
Multi-billion indirect impact generated The $74.6 billion in investment and production value generated an additional, indirect impact of $113.2 billion. This so-called ripple effect created 630,000 jobs, which, in turn, yielded $14.8 billion in salaries. About one-third of the jobs were created in the oil and gas industry.
In terms of overall economic activity, the states’ $2.5 billion investment pumped 30 times that much into the economy, said report authors David M. Garlic, retired director of Oil and Gas for the Texas Railroad Commission, and Patricia Cleary Leo, M.A., economics, Northwestern University.
“While generally unable to overcome the effects of a disastrous price fall, the only successful counter measures against the global price volatility have been the development of incentive programs to assist the oil and gas industry,” the report states.
Tax or royalty reductions offered The study found 24 states offered 151 oil and gas incentives involving tax or royalty reductions. An additional 44 non-monetary incentives were identified in 20 states.
To put its findings in context, Against the Wind also examined the impact of low oil and gas prices on state economies. Producing states suffered a $60 billion loss from the combined effects of falling oil prices, falling gas prices and a decline in drilling activity.
“The more than 141 million people living in the producing states lost the equivalent in economic power of $424 each,” Garlic and Leo explain. “During the 19-month period of the crisis, over $3 billion per month was lost by the producing state economies. Collectively, the oil and gas producers, explorationists and drillers lost approximately $2 billion per month in revenue streams compared to October 1997.”
The report points out that more than 29,000 jobs were lost during the decline. The typical family losing an oil and gas job had its family income reduced by $26,221.
Beneficiaries of low prices Americans, Iraq Besides American energy consumers, the principal beneficiary of the price collapse appears to be Iraq, the authors report. During that time, Iraqi exports to the United States increased from about 200,000 barrels per day to more than 800,000 barrels per day, according to Energy Information Administration data. U.S. domestic production decreased by 628,000 barrels per day during that period, a volume strikingly similar to the increase in Iraqi production.
Against the Wind is one section of the IOGCC publications, Investments in Energy Security: State Incentives to Maximize Oil and Gas Recovery, a 252-page catalogue of state, federal and international incentive programs. To order a copy, priced at $45, contact IOGCC headquarters at 405/525-3556 or e-mail [email protected]. It also is posted on the IOGCC Web site, http://iogcc.state.ok.us/miscfile/inc-link.htm
The IOGCC, founded in 1935 to ensure the efficient recovery of domestic petroleum resources, represents the governors of 30 oil and gas producing states. Seven states are associate members, and the IOGCC international program has four affiliates. For more information on the IOGCC, visit the World Wide Web site at www.iogcc.state.ok.us.
|
