High-Cost Natural Gas Tax Rate Incentive Study

Rider Element D

Rider Element D: Consider the economic costs and benefits to the state of any increased production that is due to the rate reduction.

The contribution of the mining industry (primarily related to oil and natural gas activity in Texas) to the state's economy has been significant for many decades. This can be examined in terms of employment, wages and salaries, and gross product. The following economic information is for the aggregate oil and natural gas industry in Texas, and does not distinguish between natural gas and oil activity.

Employment: Current (September 2014, seasonally-adjusted) employment in the mining sector in Texas stands at 323,900. Or approximately 2.8 percent of the state's total employment of 11,672,200. A year ago, September 2013, mining's employment stood at 295,400 — an increase over the year of 28,500 or 9.6 percent. Total Texas employment grew at 3.7 percent over that same period.

Within mining, subgroups include oil and gas extraction and support activities for mining. Together these two subsectors (not seasonally-adjusted) currently account for 309,400 jobs. Oil and gas extraction accounts for 113,000, an increase from 104,900 one year ago, or a 7.7 percent increase. Support activities, firms engaged in the support of drilling and extraction firms' efforts, currently employs 196,400, up from 179,000 last September and a 9.7 percent increase.

Wages and salaries: Wages and salaries earned by individuals in the oil and gas extraction and support subsectors tend to be higher than overall average Texas wages. For example, examining 2013 Quarter One statistics the oil and gas extraction subsector from the Texas Workforce Commission showed average employment those months of 100,752 and total wages that period of approximately $5.316 billion. Average weekly wages for this group during that time period was $4,058. Similarly, an average employment level of 170,539 was seen for support firms, total wages in 2013 Quarter One of $4.015 billion, for average weekly wages of $1,811. All Texas, all industry average weekly wages for that same time period was $1,015.

Gross state product: The contribution of the mining sector to the Texas economy has varied throughout the years, depending on conditions at the time. In 1997 (first year of new method of federal industrial classification, known as NAICS), the size of the mining sector — in billions of current dollars — was $36.088. Or 5.9 percent of the total Texas Gross State Product (GSP) of $612.658 billion. This proportion stayed almost constant in 2000, but by 2005 the effect of the Barnett Shale play activities can be seen. Industry gross product was $99.803 billion or 10.0 percent of total Texas gross product. By 2010, this has moved only slightly upward to 10.8 percent of the total. In 2013, the Eagle Ford Shale can be detected as total industry gross product rose to $206.220 billion or 13.5 percent of the total Texas GSP of slightly over $1.5 trillion

According to a study by IHS Incorporated6:

By 2012, the unconventional natural gas and oil activity was already supporting more than 2.1 million (U.S.) jobs across a vast supply chain — a considerable accomplishment given the relative newness of the technology. About 60 percent of these jobs - 1.3 million - were from shale gas activity, the rest from tight oil. In 2012, this revolution added $74 billion to federal and state government revenues, a number we expect to rise to about $125 billion by 2020...also becoming clear is the lower costs of energy brought about by this abundant in natural gas supply is helping to stimulate a manufacturing renaissance and improving the competitive position of the U.S. in the global economy and further stimulating U.S. job creation. (Federal Reserve) Chairman Ben Bernanke described the unconventional revolution as 'one of the most beneficial developments if not the most beneficial development since 2008' in the economy. The unconventional revolution came along at the right time. One might well wonder how the U.S. economy would look today — much higher energy bills, higher unemployment, and lower growth.

That report's section specifically relating to Texas is included as Appendix C. Briefly, it reports that "the economic activity associated with unconventional oil and gas directly and indirectly supported nearly 576,000 jobs in the state in 2012 (and) contributed value-added economic activity of $101 billion in Texas in 2012."

  • 6 America’s New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy, 2012.