State budgets are sharing in the oil and gas industry’s healthy profits, collecting immense and, in some cases, record revenues on production.
Tax data from energy-producing states show the same commodity market boom that’s driven the energy sector’s profits to new heights since the war in Ukraine began is also leaving states flush with cash.
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Texas, the nation’s No. 1 producer of oil and natural gas, levies taxes at a fixed rate against the market value of each commodity. That means revenues increase when oil and gas prices rise, and prices have been elevated all year long.
The state raised $6.36 billion in oil production tax revenue in fiscal 2022, up 84.4% from the previous year. Revenue collected on gas production rose 185% to $4.47 billion. Together, oil and gas revenues for the year broke $10 billion for the first time ever.
High collections continue even as crude oil prices have fallen from the $100-plus per barrel levels sustained throughout the spring and summer.
Texas’s oil production tax brought in $544 million in October, while the natural gas production tax brought in $410 million. Revenues last month rose 33% and 59%, respectively, compared to October 2021, according to figures from state Comptroller Glenn Hegar.
In New Mexico, which shares the high-producing Permian Basin with Texas and also earns royalties from production on federal and state lands within its borders, oil and gas revenues earned between January and April of this year rose to more than $1.7 billion.
Revenues over the same period last year totaled just above $782 million.
A dollar increase in the per-barrel price of oil translates into about $21 million for New Mexico’s general fund, according to a primer published by the state’s Legislative Finance Committee, while a 10-cent increase in the price per thousand cubic feet of natural gas translates into $15 million in additional revenue.
For reference, the global benchmark averaged $70.89 per barrel in 2021 and is forecast to average $102 per barrel in 2022, according to the Energy Information Administration.
Smaller producers are benefiting from the windfall, too. In October, Montana announced second-quarter revenues collected from the state’s oil and gas production tax, which were nearly double those collected in the second quarter of 2021.
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Oil and gas companies, especially the largest among them, have been under immense scrutiny from President Joe Biden and other Democratic politicians for reporting consecutive quarters of ballooning earnings while consumers pay more for gasoline and other products.
Biden recently threatened to impose a windfall tax on the sector if they don’t invest more of their profits to increase production and add refining capacity. He accused them of unethically profiting off the war in Ukraine’s disruption to energy markets.
The industry has rebuffed Biden’s charges, arguing that oil market dynamics rather than individual companies are responsible for oil and gasoline prices.