When we talk about the low commodity prices, we often forget other ancillary impacts of those declines.
States that are heavily reliant on energy also feel the pinch and are having to reevaluate their budgets to address shortfalls from lower severance tax collection.
According to the U.S. Energy Information Administration ("EIA"), severance taxes are "taxes based on the volume and/or value of oil, natural gas, coal, and other natural resources."
States like Wyoming, North Dakota, Texas, Oklahoma and West Virginia have, according to the Wyoming Business Report, seen significant reductions in severance tax receipts.
For example, severance taxes made up a reported 39% of Wyoming revenue in 2014; the state is currently expecting a drastic shortfall.
We also forget about Alaska – it has reportedly been hit the hardest because it evaluates companies on earnings for tax purposes, rather than volumes extracted. Alaska tax collections from fossil fuels reportedly "dropped from $5 billion in 2012 to practically no revenue." Alaska is said to derive 72% of its revenue from the energy industry. According to the EIA, Alaska relies on revenues from oil and natural gas production for up to 90% of its budget.
We can't forget about these impacts on state severance taxes, as these impacts will be significant.
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