You_Say_You_Want_a_Revolution_Fracking_P

You_Say_You_Want_a_Revolution_Fracking_P - Tax Management...

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Reproduced with permission from Tax Management Weekly State Tax Report, 2015 WSTR 6, 12/04/2015. Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) Ta x B a s e In this article, Nick Mastron, Ph.D. student at the George Washington University, dis- cusses the interplay of the international political economy’s role in natural resource pricing, the U.S. markets, and the effect on state and local economies, specifically state natural re- source funds You Say You Want a Revolution? Fracking, Prices and States’ Fiscal Responses B Y N ICHOLAS M ASTRON A s any hydrocarbon investor knows, the U.S. has al- ways represented an anomaly in its development of oil and natural gas. But by 2005, the U.S. had overcome many of the geological, legal, and economic constraints that had been limiting oil and natural gas re- covery. By engineering the needed extraction technolo- gies, chiefly hydraulic fracturing and horizontal drill- ing, production firms now possessed the ability and in- centive to drill deeper and capture the resource more efficiently. This then led to the modern oil and gas boom. However, a decade after initial expansion, falling prices are purportedly lowering American extraction. This article investigates the interplay of the interna- tional political economy’s role in natural resource pric- ing, the U.S. markets, and the effect on state and local economies, specifically state natural resource funds. Given the recent price declines of both oil and natural gas, a longer time series analysis might reveal what are the real relationships between countries, financiers, and state governments. Three issues help show how the international actors impact the U.S. oil and gas markets both national and state levels. Initially, this article reviews the pricing me- chanics used for setting the oil and natural gas prices Nick Mastron is a current Ph.D. student in Public Policy & Administration at the George Washington University. He also serves as a research assistant at the George Washington Institute of Public Policy on the Significant Features of the Property Tax project. He previ- ously attended the University of Memphis, where he received Bachelor of Arts degrees in Political Science, Economics, International Studies and History. He would like to thank Dr. Catherine Collins for her dedicated research guidance. Copyright 2015 TAX MANAGEMENT INC., a subsidiary of The Bureau of National Affairs, Inc. ISSN 1534-1550 Tax Management Weekly State Tax Report
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internationally. Next, it details the process by which these international pricing regimes interact within American production activities. However, given that U.S. production of oil and natural gas remains limited geographically to specific states and reservoirs, a third consideration exists. To what extent have states recog- nized the cyclical nature of these natural resources and factored these concerns into state and local planning and forecasting?
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