West Texas lawmakers push bills to divert some oil and gas taxes to help oil-producing counties with roads, other needs

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ODESSA — The fracking boom that resuscitated the Texas oil fields has also beaten up the infrastructure in the Permian Basin, the state’s biggest oil and gas drilling region.

More heavy trucks drove through small towns, tearing up roads. Companies built temporary workforce housing, called man camps, which local officials said dramatically increased the population, requiring more public services like garbage pick-up, hospital beds and first responders.

Local leaders say the oil boom has caused strains that their city and county budgets can’t keep up with.

Two West Texas lawmakers want to divert 10% of the roughly $8 billion that oil and gas companies pay the state in so-called severance taxes to benefit oil-producing counties. Legislation sponsored by State Reps. Tom Craddick of Midland and Brooks Landgraf of Odessa would redirect a portion of those taxes to 32 eligible counties to be used for infrastructure repairs, emergency services, health care, education and workforce development.

Regulators, industry and environmental policy experts agree that addressing the damage caused by decades of oil and gas production will require significant policy and funding changes.

A report by the House Appropriations Committee on House Bill 2154, which Craddick and Landgraf authored together in 2019 to address the same issues, said that failing to help communities in the oil patch repair their infrastructure could also impede the oil and gas industry.

“In recent years, the regions of Texas responsible for the growth in the state's oil and natural gas production have encountered significant challenges that have limited the potential growth of the energy sector and could pose a significant threat to the sustained future growth of oil and natural gas production in the state,” the report said.

Their 2019 bill died in the Senate. And in 2021 and 2023, they tried and failed again.

This time, they introduced two separate proposals. Craddick authored House Bill 265, which is basically identical to the 2019 bill. Landgraf introduced House Bill 188, which would also devote money to oil field cleanup and emissions reduction programs managed by the Texas Railroad Commission and Texas Commission on Environmental Quality — and give property tax relief to homeowners statewide.

Landgraf could not say whether the changes will be enough to finally win support in the upper chamber.

“It's a high barrier. I've known that since 2018 when I first started looking into this,” Landgraf said. “But I do think that if it's a policy that we can put in place, it would have great dividends for every corner of Texas, and that's why I think it's a fight that's still worth fighting.”

The two bills would redirect some oil and gas tax money to certain oil and gas-producing counties, as well as coastal counties where a port authority transports oil and gas. Landgraf’s bill would set aside $500 million, while Craddick’s would collect up to $250 million for all eligible counties.

Under Landgraf’s bill, county governments, school districts, colleges and nonprofits in qualifying counties could apply for the money and spend it on things like road repairs, improving schools, workforce development initiatives and emergency services.

The remaining $300 million would go toward the Property Tax Relief Fund, an account managed by the state comptroller used to reduce maintenance repairs in school districts, which are funded by local property taxes.

If one or both of the bills can get through the Legislature and get Gov. Greg Abbott’s approval, they would still need to go before Texas voters this fall as a constitutional amendment.

Budget writers in both chambers typically don’t like being told how to spend money through constitutional amendments, said Sherri Greenberg, a dean of state and local government engagement at the University of Texas at Austin.

The intense pace of oil production in the Permian Basin, which covers 75,000 square miles between Texas and New Mexico, has also inflicted environmental damage.

The Texas Railroad Commission, the state agency that regulates the state’s oil and gas industry, has said it cannot afford to keep up with the increasing cost of plugging thousands of so-called orphan oil and gas wells, which have no clear owner or were drilled by now-bankrupt companies.

Recently, a number of these wells have unexpectedly erupted with toxic wastewater that apparently migrated from oilfield disposal wells.

Under Landgraf’s bill, 1% of the diverted money would go to the Railroad Commission to help plug orphan wells. An additional 1% would pay for emissions reduction efforts in trucking, farming and construction overseen by the Texas Commission on Environmental Quality.

Oil companies, trade groups and environmentalist policy experts have testified in favor of both bills.

Cyrus Reed, a legislative and conservation director for the Sierra Club, which advocates for policies that strengthen environmental protections nationally, said he supports Landgraf’s bill for its environmental propositions.

“We're going to support any solution that gets more revenue paid by the oil and gas industry to resolve (environmental) issues,” Reed said. “We don't want to rely on … just general revenue from the people of Texas to pay for a problem that industry created.”

Landgraf hopes that expanding the legislation so it has an impact beyond energy-producing regions of Texas will help it gain more support in the Legislature.

“My position is that what's good for the Permian Basin is good for all of Texas,” he said “But sometimes that takes a bit more of a holistic or longer view for people not from the Permian Basin to reach that conclusion.”

Disclosure: The University of Texas at Austin has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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