SUPPORTING TEXAS:

Taxes Paid by the Oil and Gas Industry

October 2010

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Business’ Share of Tax BurdenAll Industries, State Rankings

State and Total

Local Bus. Taxes

Share % of GSP

California 45% 11%

Texas 61% 8%

New York 43% 13%

Florida 50% 11%

Illinois 43% 11%

Pennsylvania 42% 11%

Ohio 44% 12%

Michigan 42% 12%

Georgia 44% 9%

North Carolina 38% 9%

United States 45% 10%

FY 2009

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Business’ Share of Tax BurdenAverage Cost Per Employee

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Tax & Fiscal Consulting

$0

$10,000

$20,000

$30,000

State and Local Taxes and State RoyaltiesPaid Per Job in Texas

Fiscal 2009

All Industries,Average

$5,595

Business’ Share of Tax BurdenAverage Cost Per Employee

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$0

$10,000

$20,000

$30,000

State and Local Taxes and State RoyaltiesPaid Per Job in Texas

Fiscal 2009

Oil & Gas Sectors

All Industries,Average

$5,595

$26,947

Business’ Share of Tax BurdenAverage Cost Per Employee

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Tax & Fiscal Consulting

$0

$10,000

$20,000

$30,000

State and Local Taxes and State RoyaltiesPaid Per Job in Texas

Fiscal 2009

Oil & Gas Sectors

All Other Industries, Average

$4,769

$26,947

“Oil & Gas” DefinedNAICS Codes, Direct Employment, Fiscal 2009

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Jobs Wages Per job211111 Crude Petroleum & Natural Gas Extraction 80,706 12,675,369,045$ 157,056$ 211112 Natural Gas Liquid Extraction 4,050 570,575,390$ 140,883$ 213111 Drilling Oil and Gas Wells 35,113 3,290,789,436$ 93,720$ 213112 Support Activities, Oil/Gas Operations 82,111 6,258,959,942$ 76,226$ 22121 Natural Gas Distribution 7,222 749,655,817$ 103,809$ 32411 Petroleum Refineries 22,201 2,464,705,366$ 111,018$ 32511 Petrochemical Manufacturing 15,969 1,585,564,460$ 99,293$

333132 Oil and Gas Field Machinery & Equipment 41,345 3,315,116,484$ 80,182$ 4247 Petroleum and Petroleum Products Merchant Wholesalers 13,350 1,194,449,570$ 89,475$ 486 Pipeline Transportation 13,422 1,743,267,830$ 129,881$

315,487 33,848,453,340$ 107,289$

“Oil & Gas” DefinedNAICS Codes, Direct Employment, Fiscal 2009

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Jobs Wages Per job211111 Crude Petroleum & Natural Gas Extraction 80,706 12,675,369,045$ 157,056$ 211112 Natural Gas Liquid Extraction 4,050 570,575,390$ 140,883$ 213111 Drilling Oil and Gas Wells 35,113 3,290,789,436$ 93,720$ 213112 Support Activities, Oil/Gas Operations 82,111 6,258,959,942$ 76,226$ 22121 Natural Gas Distribution 7,222 749,655,817$ 103,809$ 32411 Petroleum Refineries 22,201 2,464,705,366$ 111,018$ 32511 Petrochemical Manufacturing 15,969 1,585,564,460$ 99,293$

333132 Oil and Gas Field Machinery & Equipment 41,345 3,315,116,484$ 80,182$ 4247 Petroleum and Petroleum Products Merchant Wholesalers 13,350 1,194,449,570$ 89,475$ 486 Pipeline Transportation 13,422 1,743,267,830$ 129,881$

315,487 33,848,453,340$ 107,289$

All Private Sector 8,475,327 390,851,842,694$ 46,116$

All Private other than oil and gas 8,159,840 357,003,389,354$ 43,751$

Industry Impact, Taxes and Wages

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$-

$30,000

$60,000

$90,000

$120,000

$150,000

Taxes and WagesPaid Per Job in Texas

Fiscal 2009

Oil & Gas Sectors

All Other Industries, Average

$134,236

$48,521

Drilldown on Taxes – Oil & Gas Sectors

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($ bil.)

Property Tax 3.3$

Sales, state and local 1.3

Franchise tax 0.5

Oil Severance 0.9

Gas Severance 1.4

Oil and gas well servicing 0.04

Other taxes 0.2

Royalties to state funds 0.8

Total 8.5$

Fiscal 2009, Taxes and State Royalties Paid

Property Tax

Sales, state and local

Franchise tax

Oil Severance

Gas Severance

Oil and gas well servicing

Other taxes

Royalties to state funds

Drilldown on Taxes – Oil & Gas Sectors

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Property Tax: $3.3 billion

• Companies pay property tax on:• Mineral producing properties – four to six × per mcf or barrel• Pipelines• Refineries and petrochemical plants• Office buildings• Everything else

• Companies pay property tax to:• School districts• Cities• Counties• Special districts – MUDs, hospital districts, junior college districts, et. al.

Drilldown on Taxes – Oil & Gas Sectors

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Franchise Tax: $529 million

• Industry sectors:• Oil & gas production• Pipelines and natural gas distribution• Refining and petrochemicals• Machinery manufacturing• Motor fuels wholesale distribution

• Franchise tax applies to:• Corporations• LPs, LLCs, and most liability-limited entities• Combinations of the above

• Companies pay franchise tax to:• State of Texas (no local component)

Drilldown on Taxes – Oil & Gas Sectors

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Sales Tax: $1.3 billion

• Companies pay sales tax on:• Drilling rigs and drill bits• Pumps, valves, fittings• Mud, fracturing fluids, measuring and control instruments• Refinery “repair and remodeling”• Non-manufacturing use of electricity, gas, telephone, computers

• Companies pay sales tax to:• State of Texas• Cities• Counties• Special districts – MTAs, library districts, et. al.

Drilldown on Taxes – Oil & Gas Sectors

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Production, or “severance” taxes: $2.3 billion

Gas: $1.4 billion Oil: $0.9 billion• Companies pay severance tax of:

• 7.5% on conventional gas production• Sliding scale (0%-7.5%) on high-cost gas production• 4.6% on conventional oil production• 2.3% on enhanced oil recovery production• Additional 13/16 cents/barrel tax and fee on production

• Companies pay production tax to:• State of Texas

Drilldown on Taxes – Oil & Gas Sectors

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Production, or “severance” taxes: Rainy Day Fund• Three-fourths of collections in excess of 1987 thresholds:

• Oil threshold: $533 million• Gas threshold: $600 million

• In the current 2010-11 biennium, deposits anticipated:• Oil: $520 million• Gas threshold: $606 million

• At the end of the current 2010-11 biennium, Rainy Day Fund balance anticipated:

• $8.2 billion

Drilldown on Taxes – Oil & Gas Sectors

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Royalties to State Funds: $819 million• Permanent School Fund – market value: roughly $20 billion “Sec. 5. PERMANENT SCHOOL FUND; AVAILABLE SCHOOL FUND; USE OF FUNDS; DISTRIBUTION OF AVAILABLE SCHOOL FUND. (a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties.”Amended Aug. 11, 1891

• Permanent University Fund – market value: roughly $10 billion “Sec. 11. PERMANENT UNIVERSITY FUND; INVESTMENT; ALTERNATE SECTIONS OF RAILROAD GRANT. In order to enable the Legislature to perform the duties set forth in the foregoing Section, it is hereby declared all lands and other property heretofore set apart and appropriated for the establishment and maintenance of the University of Texas…”

Drilldown on Taxes – Oil & Gas Sectors

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Other Taxes Counted • Oil and gas well servicing: $36 million• Motor vehicle sales tax: $60 million• Motor fuels tax (paid): $72 million• Gas utility and gross receipts taxes: $81 million

Other Taxes Not Counted • Motor fuels tax collected and remitted: $3 billion• Sales tax collected at retail stations• Coastal protection (imported oil) fee: $16 million• Drilling permit fees: $8 million• Oil and gas cleanup regulatory fees: $7 million• Air control fees• Local franchise fees paid• Anything else

SUPPORTING TEXAS:

Taxes Paid by the Oil and Gas Industry

October 2010

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Estimates provided by Tax & Fiscal Consulting