Summary

The fiscal and economic condition of the Southwestern States (Texas, Oklahoma, and Louisiana) has long been inextricably linked to oil and gas activities. However, the region's oil and gas reserves and production have been declining since the early 1970's, and prospects for this trend to reverse are not good. Yet continued heavy reliance on decreasing resources has caused little concern for diversification planning, perhaps largely because rising energy prices are stimulating the region's economy and generating increased public sector revenues. Although the region currently is fiscally and economically healthy, troublesome trends indicate that long-range planning is needed.

Historically, direct mineral revenues have been a large part of the Southwestern States' budgets. In 1977, at least 1 of every 13 regional employees worked in petroleum and related industries, and 12 percent of the region's total payroll dollars was paid by these industries. Generally, the region's petroleum and related industries are heavily concentrated within certain cities and counties. Areas having a heavy concentration of petroleum and related industries become vulnerable as nonrenewable oil and gas resources are depleted. The region's vulnerability can be decreased through diversification; however, the incentive to diversify is hampered by the high profits, wages, and taxes currently provided by these industries. The likely crude oil outlook for the three States is a continuation of the current trend of decreasing production. A turnaround is more possible for natural gas production than for oil, but unlikely. However, the States do not have specific economic development policies to encourage diversification which would counterbalance their dependence on the oil and gas industry. Finally, the Federal agencies which have planning assistance programs are not addressing possible long-range fiscal and economic problems in the Southwest stemming from the region's heavy reliance on the two industries.