There are many practical reasons why states across America invest in the safe, well-regulated development of natural gas and oil resources – from the hundreds of thousands of potential job opportunities it creates, to bolstering national security and reducing our dependence on foreign sources, to contributing to local communities and supplying the energy needed to power homes, businesses, tourism and travel.
But there are also dollars and cents, economic reasons why states remain open for business when it comes to natural gas and oil development. Revenues from natural gas and oil typically compose upwards of 25% of the state’s general fund from year to year, representing a critical piece of the budget and helping to provide a steady revenue stream for things like education, public safety and infrastructure needs. Recently, the federal government delivered a nearly $500 million royalty check to New Mexico for natural gas and oil development, bringing the state’s total to over $1 billion in royalties for the year. To put this into context, it could cover over three years of state spending on police, the annual retirement benefits of over 23,500 teachers, and 88% of state spending on highways.
The benefits of natural gas and oil development extend much further than just the areas where development takes place, helping to reduce unemployment statewide and lift up other industries like manufacturing, retail and construction. The state relies heavily on these revenues to provide the services its citizens need.
With the administration’s proposed plan to open up the Atlantic and Eastern Gulf to offshore natural gas and oil development, current projections indicate that, if enacted, offshore royalty and revenue sharing agreements for surrounding states would have comparable impacts. At a time when state budgets in Florida, South Carolina, North Carolina and Virginia are increasing, the prospect of natural gas and oil development could mean hundreds of millions — and in Florida’s case, billions — of additional revenues if the state and federal revenue sharing agreement is similar to the current Gulf of Mexico agreement.
Natural gas and oil revenues could be the answer for coastal states that face tough budget decisions for things like public education and infrastructure. It is not unlikely that New Mexico would be facing budget shortfalls if it were not for its natural gas and oil royalties — and checks like the nearly $500 million one they received today.
Potential Annual Royalty Revenues For Explore Offshore States
Florida: $1.3 Billion
South Carolina: $445 Million
North Carolina: $500 Million
Virginia: $235 Million