A report released Tuesday by a Montana-based research group said the economic boon of the fossil fuels industry comes from tax revenues, not energy-related jobs for workers who can be transient, and it recommended maximizing those revenues by raising rates.
Headwaters Economics report’s recommendations included setting aside money to deal with environmental damage and reforming distribution of energy revenue so that money goes not only to communities affected by mining or drilling but also to those flooded with industry workers.
The report — which examined data from Wyoming, Montana, Colorado, New Mexico and Utah — charted monthly changes in rig counts against changing oil and natural gas prices and concluded that price is the primary driver of development.
The distribution of severance taxes from energy development had little to do with job growth, which is largely driven by commodity price swings, said Julia Haggerty, the report’s author.
“It’s price, not policy decisions, that determine the number of people employed in mining industries and the size of the paychecks they bring home,” she said.
The report considered Wyoming’s revenue distribution “poor” compared to Colorado, which revamped its energy assistance program in 2007.
Local communities are forced to depend on sales tax revenues to fund infrastructure and other things needed to support booming population growth connected to nearby energy development, Haggerty said.
“Even though that can enable communities to address impacts, what that leaves them with is nothing in their savings account at the end of a very disruptive period of surging energy development,” she said.
Haggerty noted that some communities, such as Rock Springs, have recovered from those effects and have entered a new, more stable phase of economic development.
“But these successes are exceptions and may be short-lived. Many local governments face budget shortfalls exacerbated by fossil fuel development to pay for roads, infrastructure and other costs,” she said. “In addition, cumulative impacts — such as degraded air quality — will be costly at the local, regional and state level.”
The report recommended raising tax rates on the industry and scrapping state revenue and spending limits that could force communities to forgo revenue. While oil and gas prices can fluctuate, tax revenues can accrue even after jobs leave, the study said.
The report said government data show energy-related jobs, including coal mining jobs, made up about 8.5 percent in Wyoming but less than 3 percent of the total employment in Colorado, Montana, New Mexico and Utah in 2008.
The study acknowledged the data might have missed some seasonal oil and gas workers or ones categorized in other industries.
Mining workers’ annual wages are typically far higher than average, the study noted.
A PriceWaterhouse-Coopers study in 2009 for the trade group Western Energy Alliance said the oil and gas industry alone provided at least 7 percent of jobs in each state, with Wyoming getting about 29 percent of its jobs — about 71,000 positions — from the industry.
Kathleen Sgamma, director of government and public affairs for the alliance, said the Headwaters study focused on a time of severe recession.
“Headwaters Economics research is always geared toward a certain agenda, and they continue to try to minimize the economic contribution of oil and natural gas, rather than celebrating the fact that it is one of several industries that together create significant jobs and economic activity across the West,” she said.
Headwaters said it receives funding from grants, foundations and agencies, including the Bureau of Land Management.