Illinois Oil Reserves Generated $89M in Property Tax Revenue From 2007-2017

Many Illinoisans may not be aware that the state’s active oil production leases are assessed and taxed as real estate, similar to property taxes paid on a residential home. All of the revenue collected from this tax – known as an ad valorem tax – stays at the local level and goes directly to support the areas where oil is produced, including counties, villages, townships, cities, and – most importantly – local schools.

An IPRB review of the latest Illinois Department of Revenue (DOR) data shows that Illinois oil reserves generated $89.6 million in ad valorem tax revenue from 2007 to 2017.

Typically, at least half of ad valorem tax revenue is used to fund public education, while the remaining monies are used to fund various local public services. That fact noted, IPRB conservatively estimates that Illinois oil reserves generated at least $44.8 million in ad valorem tax revenue for schools in producing counties from 2007-2017. This revenue is all the more significant considering Illinois public schools were woefully underfunded by the state during this time frame, placing even more burden at the local level, where too much has been asked in the first place.

IPRB will highlight this data in detail in a comprehensive report to be released in August.

Ad valorem tax revenue from Illinois oil production has a particularly significant impact in major producing counties. DOR data show that ad valorem tax revenue in Illinois’ top-15 oil producing counties totaled $78.95 million from 2007-2017.

IPRB conservatively estimates that at least $39.4 million of that revenue went to public schools in those top-15 producing counties.

It is important to note that many of these counties have relatively small populations and are relatively poor compared to many other state counties and the state as a whole. In fact, all but one of Illinois’ top oil producing counties (Crawford) have poverty rates that are higher than the national average – adding even more significance to the ad valorem tax revenue generated by oil reserves in these counties.

For perspective, here are some notable county-level breakdowns that will be featured in IPRB’s upcoming comprehensive report:

  • In White County – Illinois’ top oil-producing county – ad valorem revenues generated by oil reserves totaled more than $15 million from 2007 to 2017. That means at least $7.5 million was generated for the county’s three school districts and approximately 2,400 K-12 students during that time frame. Ad valorem taxes on White County oil reserves represented approximately 11 percent overall property tax revenue collected in the county from 2007 to 2017.
  • Lawrence County oil reserves generated $6.3 million in ad valorem tax revenue from 2007-2017, meaning that at least $3.15 million was generated for the county’s two school districts and approximately 2,250 K-12 students.
  • Oil reserves in tiny Wabash County (population 11,489) generated $4.5 million in ad valorem revenue from 2007-2017, meaning at least $2.25 million was generated for the county’s two school districts and 1,690 K-12 students.
  • Ad valorem tax revenue from oil reserves in tiny Gallatin County (population 5,080) totaled $4.5 million from 2007-2017, meaning the county’s lone school district received at least $2.25 million from that total during that time frame.
  • Ad valorem tax revenue from oil reserves in tiny Hamilton County (population 8,194) totaled $3.1 million from 2007-2017, meaning the county’s lone school district received at least $1.55 million from that total from 2007-2017.

It is important to understand that these taxes are based on estimates of oil reserves remaining in the ground, not oil produced. The annual ad valorem tax bill that operators and royalty owners receive is also based on data that is over two years old. For example, ad valorem taxes paid in 2017 were based on a 2016 assessment of active leases that is calculated using 2015 production totals. There are also reductions for leases based upon lease age, secondary recovery methods used and production.

As complicated as the ad valorem tax calculation system may be, it is clear that these taxes are generating significant revenues in the communities where they operate, specifically for local schools.

IPRB will release a full, comprehensive ad valorem tax report in August and update it on an annual basis.