DALLAS - Texas oil and gas producers paid a record $15.7 billion in taxes and royalties in 2014, but revenue collections are expected to decline this year because of the fall in crude prices, industry officials said.
The 2014 revenues were more than double the total in 2010, according to Todd Staples, president of the Texas Oil and Gas Association.
While producers have cut back sharply in regions such as the Barnett Shale of North Texas, the Eagle Ford Shale of South Texas and the Permian Basin of West Texas, oil and gas will remain an economic mainstay for the state in 2015, Staples said.
"Even in years when oil and gas tax revenue doesn't make history, state and local tax revenue from the oil and gas industry always makes a tremendous impact for the people of Texas," he said.
The state's $7.5 billion Economic Stabilization Fund, or "Rainy Day Fund," is derived almost exclusively from oil and gas severance taxes. On Nov. 4, voters approved a constitutional amendment to direct billions of dollars in oil and natural gas tax revenue toward Texas highways. The previous year, Texas voters approved using $2 billion from the Rainy Day Fund to fund the state's water plan.
Oil and gas royalties and leases also fund the Permanent School Fund, which backs billions of dollars of local school district bonds in the state. The Fund, worth $37.7 billion, was identified as the largest education endowment in the nation last year.
The oil and natural gas activity supports 41% of the Texas economy as measured by Gross State Product, Staples said.
"The oil and gas industry creates an economic ripple effect, with every direct oil and gas job creating additional jobs in supporting industries," Staples said.
Since August, the price of benchmark West Texas Intermediate crude has fallen from more than $100 per barrel to around $50.
The falling price of oil has reduced inflation, which has had an impact on interest rates, according to the Federal Reserve.
Fitch Ratings in a Feb. 25 report said the steep decline in the price of oil has exposed numerous oil-dependent issuers across multiple sectors to heightened risks as a result of significant declines in revenues and cash flow.
The report maps sensitivities to a prolonged low oil price scenario across a disparate set of energy-dependent sovereigns, corporates, and U.S. states.
The report introduces an oil price sensitivity matrix that frames the relative financial vulnerability of 30-plus Fitch-rated issuers in an extended $50-per-barrel price scenario. Sensitivity to a prolonged oil price shock is assessed with respect to two key parameters -- expected changes in revenue or EBITDA, and leverage.
"For five U.S. states with heavy dependence on the energy industry, an extended $50-per barrel scenario would drive a sharp decline in oil-related revenues," Fitch managing director Robert Grossman said. "The extent of a state's vulnerability, however, depends greatly on the relative contribution of oil production taxes to the state's operating budget."
