Shale drilling rush may boost Texas tax revenue

AUSTIN, Texas -- While the Eagle Ford shale boom in Texas isn't the first that Daryl Fowler has seen, the DeWitt County judge is working to ensure that his community will be left with new roads and housing when the oil and gas are gone.

Judge Fowler, whose non-judicial post gives him administrative control over the county 70 miles southeast of San Antonio, has negotiated an $8,000-per-well fee from drilling companies to pay for roads. The county was able to reduce its property tax rate by 18 percent this year, while total assessed value jumped 27 percent as producers sought permits to drill more than 340 wells.

"It takes 270 loads of gravel just to build a pad used for drilling a well, which means a lot of truck traffic on a lot of roads that nobody except Grandpa Schultz and some deer hunters may have used in the past," Judge Fowler, 55, said in a phone interview.

From Pennsylvania to North Dakota, production of natural gas locked in shale formations is on a tear. The output will support 870,000 jobs and add $118 billion to economic growth in the next four years, plus $57 billion in federal, state and local taxes by 2035, according to a Dec. 6 report from IHS Global Insight, a forecaster based in Englewood, Colo.

By early 2012, Texas will become the third state to gain back all the jobs lost during the last recession, following oil- and gas-rich North Dakota and Alaska, the IHS said.

Under Republican Gov. Rick Perry, seeking his party's presidential nomination, Texas communities have encouraged the process known as hydraulic fracturing, or fracking.

The technique, used in as much as 90 percent of new gas wells drilled in the United States each year, forces a mixture of water, chemicals and sand into underground shale formations, breaking open the rock and freeing the natural gas it contains.

Shale development is also surging in North Dakota's Bakken formation and in the mid-Atlantic's Marcellus and Utica deposits. West Virginia passed a law Dec. 14 regulating fracking, and New York is studying drilling rules that suspended development of similar geologic structures that contain trapped oil and gas. New Jersey lawmakers sought to ban drilling before Gov. Chris Christie vetoed the measure.

"There are some places that are totally anti-development," David Porter, one of three Texas commissioners overseeing oil and gas extraction, said by phone Dec. 15. "We are very pro-development."

"It's an understatement to say that Texas leaders have generally positive views toward oil and gas development," said Scott Anderson, a senior policy analyst with the nonprofit Environmental Defense Fund in Austin. Permits for drilling cost a few hundred dollars in Texas, compared with a few thousand in West Virginia and Pennsylvania, he said.

Fracking's environmental impact has become a key issue in local political elections in parts of Texas' Dallas-Fort Worth metro area, where wells abut residential neighborhoods, Mr. Anderson said. "There's been a definite shift in attitude among elected officials, and the industry does face closer scrutiny," he said.

In New York, New Jersey and Delaware, foes say they are concerned that contaminated water can leak from wells. New York is considering rules to prevent drilling near aquifer boundaries and water wells, and to force developers to store waste in tanks to contain contamination. Pennsylvania also restricts well locations to keep them from water supplies. Texas has no such limits.

States now regulate fracking, although the Environmental Protection Agency is reviewing the effects of the process and may issue rules on waste handling in 2014. Among concerns are leakage of the slurry from wells into water supplies and disposing of tainted fluids.

An EPA investigation found evidence of fracking chemicals in an aquifer in Wyoming, the agency said Dec. 8.

First published on December 24, 2011 at 12:00 am

Source: http://www.post-gazette.com/pg/11358/1199084-503-0.stm?cmpid=marcellusshale.xml

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