Shale gas, oil could slightly increase tax revenues, CBO says

Oil and natural gas from shale could increase federal tax receipts by about 1 percent in 2040, the Congressional Budget Office (CBO) said.

In a report released Tuesday, the CBO said hydraulic fracturing and horizontal drilling — two oil and gas recovery techniques that have increased substantially due to their use in shale drilling — increase productivity, giving people and businesses more money to spend.


The drilling and related activities also increase economic activity, which will lead to growth in gross domestic product (GDP).

“On net, CBO estimates that real (inflation-adjusted) GDP will be about two-thirds of 1 percent higher in 2020 and about 1 percent higher in 2040 than it would have been without the development of shale resources,” the agency said.

That GDP growth will result in about 0.75 percent more taxes, or $35 billion, in 2020 than the government would have gotten, and 1 percent by 2040.

Shale oil and gas will also help the federal budget through increased royalty payments from drilling on federal land, CBO said.

“But that contribution has been modest and will continue to be, because most shale resources are not on federal land,” it said.

Those royalties will add about $300 million to the federal coffers in 2020.

CBO also looked into potential policies to increase oil and gas exports, concluding that increased production for exporting would increase federal revenue slightly.