Shale Public Finance: Local government revenues and costs associated with oil and gas development

Abstract

Oil and gas development associated with shale resources has increased substantially in the United States, with important implications for local governments. These governments tend to experience increased revenue from a variety of sources, such as severance taxes distributed by the state government, local property taxes and sales taxes, direct payments from oil and gas companies, and in-kind contributions from those companies. Local governments also tend to face increased demand for services such as road repairs due to heavy truck traffic and from population growth associated with the oil and gas sector. This paper describes the major oil- and gas related revenues and service demands (i.e., costs) that county and municipal governments have experienced in Arkansas, Colorado, Louisiana, Montana, North Dakota, Pennsylvania, Texas, and Wyoming. Based on extensive interviews with officials in the most heavily affected parts of these states, along with analysis of financial data, it appears that most county and municipal governments have experienced net financial benefits, though some in western North Dakota and eastern Montana appear to have experienced net negative fiscal impacts. Some municipalities in rural Colorado and Wyoming also struggled to manage fiscal impacts during recent oil and gas booms, though these challenges faded as drilling activity slowed.