Updated Report: Illinois Oil & Gas Reserves Generated $98.6M in Property Tax Revenue From 2007-2019

March 4, 2021
|In Uncategorized
|By Seth Whitehead

Note: This blog was updated with 2019 revenue on March 4, 2021.

Many Illinoisans may not be aware that the state’s active oil and natural gas 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 $98.6 million in ad valorem tax revenue from 2007 to 2019, an average of more than $7.5 million per year. IPRB details this revenue in an updated annual report that can be downloaded here.

Typically, at least half of ad valorem property 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 $49.3 million in ad valorem tax revenue for schools in producing counties from 2007-2019. 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.

Ad valorem tax revenue from Illinois oil production has a particularly significant impact in major producing counties. IDOR data show that ad valorem tax revenue in Illinois’ top-15 oil producing counties totaled $87.9 million from 2007-2018, an average of more than $6.7 million per year.

 

IPRB conservatively estimates that at least $43.9 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 and natural gas reserves in these counties. Just two percent of Illinois’ overall population resides in these top-15 producing counties, which are responsible for 90 percent of Illinois oil production.

Here are county-level breakdowns for Illinois’ top-15 producing counties featured in IPRB’s report:

It is important to understand that these taxes are based on estimates of oil and gas reserves remaining in the ground, not oil and natural gas 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.