The better-than-expected revenues shown by this week's revised estimate should cut in half a projected budget hole of about $100 million for the 2013 fiscal year.
Effects of oil estimate
The Tax Commission approved increasing in the price of oil, which is about $102 a barrel. The Commission used an estimate of $92.50 a barrel in December; the latest revenue estimate is based on $96.62 a barrel.
The high price of oil has spurred drilling activity in the state, which means the state will have to pay more in rebates to oil and natural gas companies than estimated two years ago.
To help the state get through a significant budget shortfall in 2010, oil and natural gas companies agreed to have the state suspend for two years a rebate program on oil and natural gas produced through certain more expensive drilling methods. It was estimated they would have been paid $150 million in rebates for the two-year period, which ends July 1. The agreement called for the state to pay back the energy companies $50 million a year for three years beginning with the 2013 fiscal year.
Actual drilling figures, however, showed the state owes $294 million in rebates on oil and natural gas from horizontal and deep wells. As a result, the state will have to pay oil companies $98 million a year for three years.
Miller said the increased drilling activity benefits the state.
“When that gas is coming out of the ground, people are employed to pull it out of the ground,” he said. “Those folks that are working the gas and oil rigs are having incomes and they go and spend those incomes on goods and services, and so we see a strong update in our income and sales tax collections. It's all connected.”