Local government to benefit from new well sites

I have recently been receiving emails about the increasing number of energy sector production sites. As you can imagine, seismic testing and deployment of heavy equipment quickly captures the attention of nearby homeowners who worry about the impact of heavy equipment on their roads.

This increased activity has been expected by attentive local policy leaders. For some time now researchers have been raiding area courthouses to sort through public land records and locate drilling opportunities. As far back as 1928 a publication of the Oklahoma Geological Survey opined that “Logan County contains Oklahoma’s deepest oil field…”

The decreasing cost of technology has finally allowed producers to access previously hard to reach local oil and gas resources. The Legislature incentivizes these opportunities by providing producers with significant tax relief from part of the 7% severance tax normally assessed, provided they are drilling for those hard to reach resources. This combination of technological advance and tax incentive has resulted in the new drilling.

This has created many high paying jobs and considerably boosted our economy. I think most will agree that the benefits are significant, but some are wondering if their roads will be maintained while drilling occurs. Consider this statement from an email which I received last week,  “The huge trucks run up and down in all kinds of weather often rendering the roads impassable.  I used to pray for rain; now I don’t. After spending way more time having to maneuver my way home through the rutted and muddy roads, I then have to get a scrub brush and hose and clean all four tire wells. This is a dirty job, but if I don’t, it dries out and the next day my car shakes violently on the highway because the mud makes the tires go out of alignment. After cleaning the tires, I feel like I’m stuck at home because leaving my house is such a hassle. I can’t get out to pick up dinner, go to the gym, go to the store, etc., unless I want to add another extra 30 minutes to the endeavor.”

Commuters want to know that local government has the resources to keep up with the road maintenance.

It is important to note that the tax relief previously mentioned does not decrease the severance taxes paid directly to local governments. It only applies against the severance tax that goes to state government. Both county government highway funds and local schools receive the same substantial and direct funding from severance taxes, regardless of the tax relief. As the energy sector grows, the county and the school district where the growth occurs receives more funding.

The Tax Commission then distributes the money to local governments based on the number of production sites in the county 12 months previous. This means increases in funding to local government trails the actual production by several months. This helps local governments avoid the temptation to spend new money before the impact of new traffic on the roads is realized. In the short term, local governments are hard pressed to keep up, but in the long term, these government entities should see an increase in collections of severance tax money. This money should be used to directly maintain the roads affected by the new drilling.

Last year, Oklahoma County received $2,060,769, Logan County received $715,284, the Guthrie school district received $366,495, the Edmond school district received $236,684 and the Deer Creek school district received $41,375 from the severance tax.

This is partly why each Logan County Commission District has a highway fund budget in excess of a million dollars and why each Oklahoma County Commission District highway fund should have approximately four million dollars. This does not count the many thousands of dollars counties receive in real estate transaction fees and revenue from the permits purchased by energy companies. It is likely that county highway funds will continue to grow in the near future and this should provide local officials the resources needed to maintain the energy sector-trafficked roads and to respond to requests from those who live on those roads.

Thank you for reading this article. Your interest and input are much appreciated. Please do not hesitate to email [email protected] with your thoughts and suggestions.