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Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina Energy Conference Implications for North Carolina

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Page 1: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

Natural gas development and local government finance

Daniel Raimi, Associate in Research, Duke University Energy Initiative

April 21, 2015

North Carolina Energy Conference

Implications for North Carolina

Page 2: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Shale Public Finance project

• Funded by:– The Alfred P. Sloan Foundation

– The Duke University Energy Initiative

• Carried out by the Duke University Energy Initiative– Richard Newell, director and principal investigator

– Daniel Raimi, key researcher and analyst

Daniel Raimi, April 21 2015 NC Energy Conference

Page 3: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Project significance

• Local public services matter for quality of life, property values, and more

• Public perception of industry matters for resource development

Daniel Raimi, April 21 2015 NC Energy Conference

Page 4: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Bakken

Marcellus

Fayetteville

Haynesville

Eagle Ford

Permian

Barnett

Green River

Map source: HPDI/Drilling Info 2.0. Heat map data represents drilling permits issued in the 90 days leading up to Jan. 14, 2014. Data not available for Alaska

Our travels to active oil and gas regions

Denver-Julesburg

Daniel Raimi, April 21 2015 NC Energy Conference

San Juan

Piceance

Los Angeles

Kern Co.

Miss. Lime

Woodford

UticaHugoton

North Slope

Kenai Peninsula

Most permits Some permits Few permits No permits

Uintah

Page 5: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Local public revenues and costs associated with oil and gas development

Daniel Raimi, April 21 2015 NC Energy Conference

Major revenue sources Major costs

State severance taxes Road damage

Local property taxes Water/wastewater infrastructure associated with population growthLocal sales taxes

Leasing revenue from public lands Staff costs: administrative, law enforcement, workforce retentionIn-kind contributions

Page 6: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Bakken

Marcellus

Fayetteville

Haynesville

Eagle Ford

Permian

Barnett

Green River

Map source: HPDI/Drilling Info 2.0. Heat map data represents drilling permits issued in the 90 days leading up to Jan. 14, 2014.

Net fiscal impacts for local governments examined

Denver-Julesburg

Daniel Raimi, April 21 2015 NC Energy Conference

San Juan

Piceance

Los Angeles

Kern Co.

Miss. Lime

Woodford

Uniformly net positive Mostly net positive Mix of positive/negative Mostly net negative

UticaHugoton

Uintah

Page 7: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

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Lessons on overall fiscal effects• Most local governments have experienced net positive fiscal

impacts to date

• Fiscal effects are not uniform– Some local governments in very rural areas have struggled financially during

large boom periods

• Collaboration with industry can help reduce costs– Especially for road maintenance/repair, as seen in AR, OH, PA and parts of CO

• State fiscal policies play an important role in providing revenue for local governments with large-scale development

Daniel Raimi, April 21 2015 NC Energy Conference

Page 8: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

Daniel Raimi, April 21 2015 NC Energy Conference

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Triassic Basins resource potential in context

- 30,000 60,000 90,000

N.C. Triassic Basins

Bakken/Three Forks

Eagle Ford

Marcellus

- 2,000 4,000 6,000 8,000

N.C. Triassic Basins

Bakken/Three Forks

Eagle Ford

Marcellus

Source: U.S. Geological Survey. Marcellus and Eagle Ford assessments from 2011. Bakken/Three Forks assessment from 2013

technically recoverable resourcesbillion cubic feet

technically recoverable resourcesmillion bbl

Natural gas Oil and natural gas liquids

Page 9: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

Daniel Raimi, April 21 2015 NC Energy Conference

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Public finance considerations in the absence of major oil and gas production• In communities with little or no drilling, some benefit, while

others face challenges

• State and local governments compete to attract large infrastructure projects

• Tax policies may provide incentives or exemptions for certain projects or activities, which may create local challenges

• State-level tax policy needs to take into account local fiscal issues

Page 10: Natural gas development and local government finance Daniel Raimi, Associate in Research, Duke University Energy Initiative April 21, 2015 North Carolina

For more information

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Daniel RaimiAssociate in Research

Duke University Energy Initiative

energy.duke.edu

[email protected]

919-886-1952

Find our publications online at: energy.duke.edu/shalepublicfinance

Daniel Raimi, April 21 2015 NC Energy Conference