Friday, November 21, 2014

Falling oil prices could cost local governments millions of dollars in lost tax revenue

A drop in oil prices could cost local governments in oil-producing regions millions of dollars in lost tax revenue, Mark Haggerty, an economist with Headwaters Economics reports for the Daily Yonder.

For example, if oil prices drop from $98 to $78 per barrel in North Dakota’s Bakken shale oil fields, "the change in price could result in about $200 million less for local governments over five years and $350 million less for state government," Haggerty writes. "Losses for that state’s permanent investment fund would be even higher. Those figures include only an estimated 2,500 new wells and don’t include lost revenues on the state’s existing wells, which number in the tens of thousands."

"In North Dakota, local governments could see about $80,000 less from each well over five years at $78 compared to $98 per barrel," Haggert writes. "Multiply that by the 2,500 wells completed annually, and the potential revenue impact is about $200,000 million for these new wells. That does not count the tens of thousands of already producing wells that pay annual severance taxes, too." (Read more) (Headwaters Economics graphic)

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