Natural Gas

Tarrant and Johnson Counties, Texas

Texas leads the country in natural gas production.¹ Tarrant and Johnson counties contribute significantly to Texas’s natural gas production due to their geographic positioning atop the rich reserves of the Barnett Shale field in the Bend Arch-Fort Worth Basin.

Geology and history

The Barnett Shale reserve spans approximately 5,000 square miles of sedimentary clay and quartz rock, with much of the productive portion of the rock located beneath Tarrant and Johnson counties. With an estimated 43 trillion cubic feet of proved reserves of natural gas, the Barnett Shale is one of the largest onshore natural gas formations in the country.²

For many years, the Barnett Shale acted as an important sealing cap rock for conventional oil and gas development, but was not regarded as a legitimate source for economically viable drilling. However, technological advances in the 1980s allowed Mitchell Energy to drill its first well, and drilling activity increased with rising gas prices in the 1990s. Specifically, horizontal drilling and hydraulic fracturing techniques allowed producers to access more natural gas from relatively thin shale deposits. The number of horizontal wells in the Barnett Shale grew from approximately 400 in 2004 to 10,860 in 2011.^{3 4}

Production

In 2016, Tarrant and Johnson counties produced a combined 765.5 million cubic feet of natural gas from state-owned lands, constituting a significant portion of Texas’s total 8.1 trillion cubic feet output.^{5 6 7} Almost all other drilling in the state occurs on private lands, as only 1.8% of the acreage in Texas is federal land.⁸ In 2016, output was roughly 0.55 times the output ten years prior.^{9 10} However, production in Tarrant and Johnson counties began to drop in 2013 with falling natural gas prices and strong global supplies.

Natural gas production on state-owned land in Tarrant and Johnson counties¹¹

Employment

The boom in natural gas production in the Barnett Shale over the past decade increased employment in this sector. Based on data from the U.S. Census Bureau, the number of residents employed in the oil and gas industries has increased by more than 18% in the past decade.¹² In 2016, the oil and gas industry (including extraction, drilling, and support services) employed 7,303 residents, down from 9,471 in 2015. This represents 0.93% of the two counties’ total employment of 783,299 and less than 0.5% of their total population of 2.2 million.¹³

Wage and salary employment in the oil and gas industry¹⁴

Revenue

The State of Texas levies a Natural Gas Production Tax at 7.5% of the market value of the gas, but with the various allowable exemptions and reductions, the effective tax rate hovers below 2%.¹⁵ In 2016, the state government collected $578.8 million from this tax, down from $1.3 billion in 2015.¹⁶ Texas earmarks some of these tax revenues for investment in the Permanent School Fund. Interest earned on Permanent School Fund investments is distributed by the State Board of Education to every school district on a per-pupil basis.¹⁷

The state also collects royalties from the natural gas produced on state-owned land. The Texas General Land Office typically receives a royalty worth 20-25% of the value of the resources extracted from state land. This can be paid in the form of cash or actual oil and gas for resale to public entities. Oil and gas leases on state-owned lands generate more revenue than any other source of income for the public education endowment. In its history, the Texas General Land Office has deposited more than $16.8 billion into the Permanent School Fund from oil and gas production revenue.¹⁸

Tarrant and Johnson counties derive additional revenue from extractive industries through local property and mineral taxes. In Tarrant County, thousands of homeowners own very small interests in gas units located under large residential developments.¹⁹ The value of all real property in a given county is assessed by the County Appraisal District, and property taxes are levied based on applicable mill rates for the locality. Property tax revenue for Tarrant and Johnson counties from all sources, not just natural gas property, totaled $398 million in 2015 ($351 million from Tarrant County and $47 million from Johnson County).^{20 21} This constituted a 5% increase from 2014. In its 2013 annual report, the Tarrant County Auditor’s Office cited the development of Barnett Shale gas resources as a factor in providing significant employment and business opportunities, which helped to offset the reduction in other property values and provided additional taxable value.²²

Costs

Texas leaves siting and permitting for natural gas development to its municipalities, and while benefits accrue to these communities, extraction does come with costs. During well construction and drilling, heavy truck traffic causes wear on roads and bridges that can significantly reduce their service life. This problem is particularly pronounced on roadways that were not originally designed to support industrial traffic. According to the Texas Department of Transportation (DOT), the volume of truck traffic required to bring one gas well into production is equivalent to the impact of approximately eight million cars; truck traffic required to maintain that well is equivalent to another two million cars. Constructing such a well reduces highway service life by as much as 53%.²³

In its 2012 State Water Report, the Texas Water Development Board recommended $400 million in public expenditures on statewide water-management strategies related to the mining sector. These expenditures ranged from mining conservation outreach efforts to water-quality monitoring and related policy work. While fracturing and total mining water use continues to represent less than 1% of statewide water use in Texas, percentages can be significantly larger in some areas, and the use of water for hydraulic fracturing operations is expected to increase significantly through 2020.²⁴ That being said, mining demand of water is projected to decline slightly from 2020 to 2070.²⁵ Various cities in Texas have accepted tens of thousands of gallons of wastewater from extractive industries into their municipal water treatment plants. For example, as of June 2010, Fort Worth’s wastewater system had treated 19,000 barrels of oil and gas wastewater.²⁶

The Texas Railroad Commission requires operators to remove water from extraction pits and refill them with sediment within set time frames, as well as completing the appropriate paperwork for any dry or inactive wells that will remain offline for more than a year.²⁷ However, in cases where operators do not comply, Texas relies on its Oil and Gas Regulation Cleanup Fund to reclaim oil and gas wells.²⁸ In FY 2016, the fund paid approximately $10.7 million for well plugging, down from $13.8 million in 2015.^{29 30 31} The commission set aside an additional $3.9 million in encumbrances for this purpose.³² A combination of industry permitting fees, production taxes, enforcement penalties, reimbursements, proceeds from the sale of salvaged equipment and hydrocarbons, and federal money from the Coastal Impact Assistance Program finance the fund.³³

Data availability

The table below highlights data sources used to compile this narrative, as well as any gaps in publicly available data.

This case study is current as of July 2017. Many data sources are updated regularly, and may show more recent figures than are included here.

Notes