They say there’s a silver lining in every dark cloud.
Like all other Americans, Alabamians have to pay more when fuel prices rise as they have recently. Our state, however, is blessed with its own oil and gas resources from which we benefit. According to published statistics, Alabama ranks 12th among 32 natural-gas-producing states and 15th among 21 oil-producing states. As these resources are withdrawn, we benefit from the taxes and royalties paid by the producers.
Oil and gas severance taxes, which are based on a percentage of the production value, contributed $139 million to the state’s General Fund revenues in fiscal 2007. Earnings from the Alabama Trust Fund (ATF), which receives payments from offshore oil and gas drilling and production, added another $103 million. These are two of the biggest sources of income for state services other than education and transportation.
The ATF was created to perpetuate the benefits of finite oil and gas resources for future generations. The fund is now valued at more than $3.3 billion.
In a typical year, the ATF receives more than $250 million from oil and gas payments. As revenue comes in, 1 percent goes to operate the state’s land-management agency and then of the balance, 65 percent is invested in the fund, 28 percent is allocated for capital improvements selected by the governor and Legislature and 7 percent is placed in a permanent fund for cities and counties. Through these provisions, $103 million went toward state capital improvements in 2007 and $26 million went into the local government funds.
As the ATF realizes investment earnings, they are distributed not only to the state’s General Fund but also to buy and maintain public recreational lands through the Forever Wild program (about $10 million a year).
Cities and counties also receive a share of ATF earnings, and if the Forever Wild allocation ever tops $15 million, then money will be set aside for senior citizen services as well. Finally the ATF board has used its discretion in recent years to allocate up to $50 million from capital gains to these programs.
In all of these ways, Alabamians benefit from the oil and gas economy.
EDITOR’S NOTE — Jim Williams is executive director for the nonprofit, nonpartisan Public Affairs Research Council of Alabama.
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