Resources ‘economic drivers’

By Jessica Legge
Times West Virginian

FAIRMONT July 05, 2009 04:34 am

— West Virginia has experienced a considerable increase in its oil and gas severance tax payments.
The West Virginia State Treasurer’s office recently reported that these annual payments to counties and municipalities throughout the state went up 16.1 percent to $8.3 million over the past fiscal year, ending June 2009.
Under state law, the tax commissioner collects the oil and gas severance tax and deposits part of the money into a fund in the treasurer’s office to benefit counties and municipalities in West Virginia. Treasurer John Perdue is responsible for holding the money in the revenue account and dispersing it, said Greg Stone, spokesman for the treasurer.
“After it’s been collected, 10 percent (of total oil and gas severance taxes) goes to counties and cities, some based on what you actually produce and some based purely on population,” he said.
He explained that 75 percent of that total distribution goes to the counties that actually produce the oil and gas. In 2009, nearly $6.3 million was distributed to oil and gas producing counties in West Virginia, compared to about $5.4 million the previous year. This year, Marion County received $120,125.14.
The remaining 25 percent of that total distribution goes to all counties and municipalities based on census population, Stone said. This year, approximately $744,000 went to municipalities in the state and more than $1.3 million went to counties. Those numbers were around $641,000 and $1.2 million, respectively, last year.
Of the money set aside based on population, Marion County got $31,066.35 in 2009.
“Natural resources represent the economic drivers for our counties and our municipalities throughout West Virginia,” Perdue said in a press release. “My office works diligently to get these funds quickly transferred to local officials so they can go about serving their constituents.”
The West Virginia Oil and Natural Gas Association, established in 1915, serves all facets of the industry, from large and small producers to distribution companies. Corky DeMarco, executive director, said the association is the largest oil and gas association in the state in the amount of production it represents, which is 70 percent.
The organization, with 80 to 90 company members, represents 12,000 miles of pipeline in the state of West Virginia and more than 300,000 individual households that use natural gas, he said.
Like the country, West Virginia’s oil and gas business has slowed a little bit in production because national gas prices are down from eight or 10 months ago, DeMarco said. But the industry is still doing well.
“West Virginia is sitting geographically closest to the largest market, which is Northeast,” he said. “Our future is extremely bright. We’re too valuable to the economic and the securitization of energy to not be a major producer.”
DeMarco said West Virginia, which is experiencing the 150th anniversary of its first gas wells, produces in the top three or four states in the country in natural gas.
“Unlike the Southwest and some other places where they may produce more over a short period of time, the Appalachian production basin is long and steady,” he said.
The Independent Oil and Gas Association of West Virginia is a 500-member trade association of oil and gas producers and the industry that serves those producers, executive director Charlie Burd said. It advocates for issues involving oil and gas drilling, energy and tax.
He said the oil and gas industry in the state has slowed because of access to capital.
“The industry is going through the same recession that the rest of the country is,” Burd said. “The price of natural gas has dropped. The price drop is directly in correlation to the rest of the industry.
“Most of those independent producers rely on investors to fund those drilling programs, and that’s where there’s a lack of capital access.”
Last year, the industry provided $80 million in severance taxes alone to the state of West Virginia, he said. Capital investments, employment, property taxes and fuel taxes bring hundreds of millions of dollars to the state.
Visit the State Treasurer’s Office Web site at www.wvsto.com.
E-mail Jessica Legge at jlegge@timeswv.com.