Home Business Permian Basin contributes $181.8 billion in GDP, 786,000 jobs to U.S. economy

Permian Basin contributes $181.8 billion in GDP, 786,000 jobs to U.S. economy

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Report: Permian Basin contributes $181.8 billion in GDP, 786,000 jobs to U.S. economy

Economic impact report highlights the growing importance of the Permian Basin

For the News-Sun

MIDLAND, Texas — The Permian Basin’s economic impact continues to gain momentum, bringing promising news for Texas, New Mexico and the entire nation.

According to the latest report by the Permian Strategic Partnership, the Permian Basin had a record year for tax revenue collected from the oil and gas industry. The Permian Basin is a renowned leading global energy-producing region with abundant natural and renewable resources.

Total tax collections from direct and indirect sources from Permian Basin oil and gas activity include an estimated $18.4 billion for Texas and $6.1 billion for New Mexico in 2022.

These funds support tax relief, road improvements, public schools and teachers, police and fire departments, community hospitals, universities and other essential services.

“Texas is blessed to be home to the Permian Basin, the nation’s most prolific energy producing region that not only strengthens our state’s thriving economy, but helps secure America’s energy independence,” Texas Gov. Greg Abbott said. “The vast oilfields of the Permian Basin have helped create unprecedented levels of economic success and opportunity in Texas, keeping our state the economic engine of America.”

Royalties are an important contributor to state revenue in both states.

In 2022, the Permian Basin contributed $2.1 billion in royalties to the state of Texas through the Texas Permanent University Fund — more than double the 2021 amount of $979 million.

“Our continued support of this critical region will ensure Texans—and Americans—have the necessary energy to power their homes, businesses, and growing local communities,” Abbott said. “I am proud of the collaborative work, spurred by the Permian Strategic Partnership, that the Permian community is undertaking to support one of the state’s most valuable treasures.”

The Perryman Group projected the Permian Basin to generate $325 billion in gross product and provide more than 1,200,000 jobs for the nation’s economy by 2050.

“The Permian Basin continues to be America’s economic powerhouse and further strengthens our nation’s national security, economic security and energy security,” said Don Evans, Permian Strategic Partnership chairman. “Our region is the world’s largest secure supply of energy. Texas and New Mexico must persist in their commitment to invest in and expand the region’s infrastructure, further empowering the energy industry to furnish the indispensable resources that fortify our nation’s robust economy.”

According to the economic impact report, the Permian is also responsible for:

• $24.5 billion in taxes collected across Texas and New Mexico.

• Doubling the amount of oil and gas severance and production taxes across both states compared to the previous year
• $2.1 billion to Texas’ Permanent University Fund and $2.1 billion to Texas’ Permanent School Fund, more than double the previous year.
• 35% of New Mexico’s state budget ($5.8 billion) and more than 1/3 of the total funding for New Mexico’s schools.
• ~3% of US wind capacity and ~8% of US total solar plant capacity. Investments in both wind and solar are growing rapidly in the Permian Basin

The region also contributed nearly $2.2 billion in royalties to New Mexico, where much of production takes place on public lands.

The revenue collected through taxes such as the Oil and Gas Emergency School Tax, the Oil Conservation Tax, and the Natural Gas Processors Tax, is deposited into the New Mexico General Fund, which is utilized for approved projects and the yearly state budget.

Oil and gas revenue also supports education in New Mexico.

The Land Grant Permanent Fund was established in 1912, the year New Mexico became part of the United States. Currently, the LGPF provides $1 billion annually to New Mexico public schools, according to the New Mexico State Investment Officer.

Students at community schools, colleges and universities in New Mexico benefit from the LGPF’s annual support.

The LGPF received $754.3 million in 2022, and will contribute $1.3 billion to education in fiscal year 2024.
In total, New Mexico’s permanent funds will provide $1.7 billion in earnings/benefits to residents as of July 1.
In 2022, the oil and gas industry supplied $5.8 billion to the New Mexico state budget, up from $3.0 billion last year.

Total New Mexico education funding provided by oil and gas was $1.4 billion — more than one-third of the funding for New Mexico schools.

And, oil and gas revenue contributed $5.8 billion — about 35 percent — to the state’s budget.

While avoiding citing the oil and gas industry as the economic engine that drives New Mexico, Gov. Michelle Lujan Grisham touted the windfall revenues the state has received from the industry.

“Our fiscal success will enable us to double down on the investments we know are working and explore innovative new strategies that move the needle and move New Mexico up in the rankings,” Lujan Grisham said, regarding New Mexico’s growing state revenues presenting an opportunity for spending in public education, healthcare, housing, abortion and public safety sectors.

Direct taxes are another key source of income. Permian Basin oil and gas producers are required to pay severance taxes, property taxes, sales tax, and other taxes in Texas and New Mexico, resulting in sizable impacts to federal, state, and local revenue.

Oil and gas production taxes in the Permian Basin in Texas provided an estimated $6.8 billion in fiscal year 2022 — more than double the $3.2 billion collected in fiscal year 2021.

In New Mexico, Permian oil and gas production taxes reached almost $4.0 billion in fiscal year 2022. This total includes $1.5 billion in School Tax, $106 million in Conservation Tax, $578 million in Production Tax, and $1,767 million in Severance Tax.

The revenue generated from New Mexico Severance Taxes is deposited into two funds: the New Mexico Severance Tax Bonding Fund and the Severance Tax Permanent Fund, which are utilized to fund capital projects for the state.

The Perryman Group has estimated New Mexico receives approximately $945 million in tax receipts, and the local government entities in New Mexico obtain around $703 million from the business activity associated with the Permian Basin oil and gas industry.

Similarly, the business activity linked to the oil and gas industry in the Permian Basin generates nearly $5 billion in indirect and induced tax receipts for Texas annually, while local government entities in Texas
receive around $3.2 billion.

New Mexico residents enjoy the benefit of lower taxes due to these revenues. Each household in New Mexico is estimated to save about $1,000 per year in taxes, without any reduction in state services.

With about 105 billion barrels of recoverable oil and 229 trillion ft3 of recoverable natural gas, the Permian Basin also helps fuel economies worldwide.

By 2025, the Permian Basin will be responsible for generating 50 percent of U.S. oil production.

Despite being home to only 1.6 percent of Texas’s population, the Permian Basin accounts for 8.2 percent of the state’s private sector GDP.

Same goes for New Mexico — only 9.3 percent of the state’s population lives in Lea, Eddy and Chaves Counties, but the Permian Basin accounts for 26.5 percent of the state’s GDP.

“This report confirms what many of us already knew: the Permian Basin is a major contributor not only to the Texas and New Mexico economies but to the national and global economy as well,” said Tracee Bentley, president and CEO of the Permian Strategic Partnership. “Through continued investment, strategic planning and foresight, the Permian Basin has created opportunity for hundreds of thousands of Americans and their families. We at the Permian Strategic Partnership will continue our work to help the Basin and all the people who call it home reach its full economic potential.”

One of the most appealing aspects of Permian Basin oil is its low carbon footprint compared to other crude oil sources.

Oil produced in the Permian, when combusted, emits 22.8 percent less carbon dioxide than oil produced elsewhere in the world. CO2 emissions are 57.6 percent less than oil from the Middle East, and 74.4 percent less than tight sand oil formations.

The CO2 emissions in Permian oil is also significantly less than Mayan oil from Mexico, and oil produced in Nigeria. No other major onshore formation can compare to the Permian Basin complex when it comes to low carbon characteristics.
When compared to equivalent energy sources, oil from the Permian also stands out. The region has 42.5 percent lower CO2 emissions than coal, while the remainder of oil in the world is only 25.2 percent cleaner than coal.

Natural gas emissions are 46.2 percent lower than coal — and when carbon capture technology is used, emissions are 60 percent lower.

Renewables comprised 15 percent of global energy consumption in 2020, and this category is expected to increase to 27 percent by 2050, becoming the second-most utilized energy source after petroleum and other
liquid fuels.

Over the past decade, the Permian Basin has increased its renewable energy capacity as demand has grown, especially in Texas.

In 2010, combined wind and solar power made up 7.8 percent of overall power generation in Texas. The percentage climbed to 30 percent by 2022. In 2022, Texas had the highest installed wind capacity of all U.S. states at 36.8 GW – more than 3x the next largest state of Iowa at 11.8 GW.

Texas is also building new facilities faster than other states. In fact, there are only four countries with higher installed wind capacity than Texas — China, the United States, Germany, and India.

New Mexico ranks sixth in wind capacity.

Texas is also growing its solar capacity.

The state soared to 8,820 MW installed, up from 4,869 MW in 2020. Texas will add 7.7 GW of capacity in 2023, and over the next two years, one-third of the solar capacity planned to come online in the U.S. will be in Texas.
Within the Permian as a whole, wind capacity has grown from less than 1,664 MW in 2010, to 4,511 MW in 2022.

Solar capacity in the region has now reached 4,582 MW, and more solar projects in the Permian Basin are expected in the future.

Beyond solar and wind energy in the Permian, another key development occurred when the Texas legislature designated the area as a “Competitive Renewable Energy Zone”, enabling transmission lines to provide renewable power across the state.
Because of the Permian Basin’s climate, landscape, and available land, solar and wind energy — along with its rich resources, strong infrastructure, and history of innovation in the energy sector — the region’s position as a clean energy leader is projected to continue to grow.

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