Cheap Oil And Gas Means Low Transportation Payout

Dec 10, 2014

On Election Day, Texans voted to put money generated from the severance tax on oil and gas towards the Texas highway fund. With 80 percent of the vote, proposition 1 was seen as a hugely popular push to fix Texas’ crumbling highway system. But falling gas prices means next year there might not be as much money available.


TxDOT expects the first installment of the Proposition 1 funds to be $1.7 billion and it’ll come in at the end of this year. But with oil and gas prices dropping, next year’s installment could be dramatically lower. See, the formula works by taking part of the taxes on oil and gas (called the severance tax) and sending the money to the state highway fund. So if the price of oil and gas isn’t as high, less money will be coming in from the tax. 

It's not a consistent tool moving into the future because depending on the production levels and the price of oil, how much is brought in can fluctuate from time to time," says John Barton, the deputy executive director of the Texas Department of Transportation.

When the Texas Legislature voted in 2013 to put Proposition 1 on the ballot, the price of oil was $106 a barrel. Now it’s down to $69 a barrel—that’s a 35 percent drop.

Proposition 1 wasn’t expected to fix the all of Texas’ transportation woes, after all, the agency says it’s operating at a $5 billion shortfall every year. But with more and more people and goods rolling across Texas’ highways every year, transportation has begun to gain widespread political support. Case in point: the 80 percent approval of Proposition 1.

At a press conference outlining his policy priorities, incoming governor Greg Abbott said one of his priorities this legislative session was transportation.

"I’ve outlined a detailed plan that will ensure that we add $4 billion more per year for building roads in this state without raising taxes, fees or tolls," Abbot said

Abbott says he’ll do that by supporting a bill that dedicates two thirds of vehicle sales tax to the highway fund—an estimated $2 billion a year.