Colorado's Piceance Basin: Variation in the local public finance effects of oil and gas development

A large increase in natural gas production occurred in western Colorado’s Piceance basin in the mid- to late-2000s, generating a surge in population, economic activity, and heavy truck traffic in this rural region. We describe the fiscal effects related to this development for two county governments: Garfield and Rio Blanco, and two city governments: Grand Junction and Rifle. Counties maintain rural road networks in Colorado, and Garfield County’s ability to fashion agreements with operators to repair roads damaged during operations helped prevent the types of large new costs seen in Rio Blanco County, a neighboring county with less government capacity and where such agreements were not made. Rifle and Grand Junction experienced substantial oil- and gas-driven population growth, with greater challenges in the smaller, more isolated, and less economically diverse city of Rifle. Lessons from this case study include the value of crafting road maintenance agreements, fiscal risks for small and geographically isolated communities experiencing rapid population growth, challenges associated with limited infrastructure, and the desirability of flexibility in the allocation of oil- and gas-related revenue.

Dunn County and Watford City, North Dakota: A case study of the fiscal effects of Bakken shale development

The Bakken region of North Dakota and Montana has experienced perhaps the greatest effects of increased oil and gas development in the United States, with major implications for local governments. Though development of the Bakken began in the early 2000s, large-scale drilling and population growth dramatically affected the region from roughly 2008 through today. This case study examines the local government fiscal benefits and challenges experienced by Dunn County and Watford City, which lie near the heart of the producing region. For both local governments, the initial growth phase presented major fiscal challenges due to rapidly expanding service demands and insufficient revenue. In the following years, these challenges eased as demand for services slowed due to declining industry activity and state tax policies redirected more funds to localities. Looking forward, both local governments describe their fiscal health as stronger because of the Bakken boom, though higher debt loads and an economy heavily dependent on the volatile oil and gas industry each pose challenges for future fiscal stability.

Local fiscal effects of oil and gas development in eight states

Oil and gas production in the United States has increased dramatically in the past 10 years. This growth has important implications for local governments, which often see new revenues from a variety of sources: property taxes on oil and gas property, sales taxes driven by the oil and gas workforce, allocations of state revenues from severance taxes or state and federal leases, leases on local government land, and contributions from oil and gas companies to support local services. At the same time, local governments tend to experience a range of new costs such as road damage caused by heavy industry truck traffic, increased demand for emergency services and law enforcement, and challenges with workforce retention. This report examines county and municipal fiscal effects in 14 oil- and gas-producing regions of eight states: AK, CA, KS, OH, OK, NM, UT, and WV. We find that for most local governments, oil and gas development—whether new or longstanding—has a positive effect on local public finances. However, effects can vary substantially due to a variety of local factors and policy issues. For some local governments, particularly those in rural regions experiencing large increases in development, revenues have not kept pace with rapidly increased costs and demand for services, particularly on road repair.