The state of Louisiana allows for the suspension of severance taxes due on production from horizontal and deep wells through a two-year tax exemption or until payout of qualified costs, whichever comes first, and the Greater Lafayette Chamber of Commerce announced Wednesday that it supports keeping the incentive in place.
In the mid-1990s the state Legislature approved a severance tax exemption for horizontal drilling in an effort to incentivise the use of that new technology. Proponents of the exemption stress that it provides economic incentives to drill capital-intensive oil and natural gas wells and to continue production from marginal wells. In its statement, the chamber argues that the incentive has resulted in a significant economic impact to the state of Louisiana, including the creation of more than 60,000 jobs that have kept state employment above average.
Citing industry sources, the chamber says the state has benefited from the injection of more than $13 billion dollars in investment and in excess of $1 billion paid to local, parish, and state governments since the discovery of the Haynesville Shale, where horizontal drilling is utilized, in late 2007.
In stating its position, the Chamber’s Energy and Public Policy Division noted that for every $1 of severance tax invested under the incentive, the state gained approximately $3 in revenues to the treasury to support state services and programs, such as health care, education, and road construction.
“Any attempt to repeal this incentive would create economic uncertainty for companies who depend heavily on this incentive and could result in a loss of the economic and community benefits of these essential developments,” said Energy Division vice chairman John O’Meara.
A panel of 14 Louisiana legislators is reviewing more than 400 tax exemptions that cost the state between $4 billion and $7 billion a year.
The chamber’s resolution will be included in a packet that will be entered into a written testimony when the tax incentives issue goes before the State Revenue Study Commission in January.