State Data Show Everything is Bigger in Texas, Including Natural Gas Taxes

Texas’ natural gas production tax garnered $413 million for the state in May, representing a 216% year/year increase and an all-time high for the levy, the Texas Comptroller of Public Accounts said Wednesday.


The state took in $595 million from its oil production tax in May, up 64% year/year, the Texas Comptroller’s office added.

Much of Texas’ production comes from the Permian Basin, which is expected to account for about half of U.S. output next year, as well as the gassy Haynesville Shale.

“Tax revenue generated by robust oil and natural gas activity across Texas continues to be a game-changer for Texans, providing billions of dollars in funding for our state’s public schools and universities, roads, first responders and essential services,” said Texas Oil and Gas Association (TXOGA) President Todd Staples.

TXOGA noted that the Texas Comptroller’s office reported the oil tax provided $666 million – a 99% year/year increase and a record – and the gas tax $339 million, up 46%, in April.

In Texas, the first purchaser of crude oil pays a 4.6% production tax on the oil’s market value, according to the agency’s website.

In the case of natural gas, a 7.5% tax is levied based on market value and is primarily paid by the producer but can also be paid by the purchaser, the Texas Comptroller’s office noted.

The state’s oil production tax receipts totaled $3.45 billion in fiscal year 2021 (FY2021) and have already hit $4.48 billion in the first nine months of fiscal year 2022 (FY2022), said TXOGA.

During FY2022, which runs through August, Texas’ natural gas production tax has already generated a record-setting $2.97 billion, which TXOGA said eclipses the previous all-time high of $2.68 billion in fiscal year 2008, early in the shale revolution.

Besides production taxes, Texas’ oil and gas industry pays property taxes, franchise and gross receipts taxes, state fees, and state and local sales taxes, said TXOGA.

State and local governments also generate revenue from the thousands of oil and gas industry workers who pay taxes in the Lone Star State. 

In FY2021, the industry as a whole “directly employed over 422,000 Texans with jobs that pay among the highest wages” in the state, said Staples.

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By the Texas Independent Petroleum and Royalty Owners Association’s latest count, about 45% of those direct jobs are in the upstream sector. The state also is home to more than 300,000 oilfield services workers, according to the Energy Workforce & Technology Council.

“If Texas were its own country, it would be the world’s third largest producer of natural gas and fourth largest producer of oil,” TXOGA said.

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