There has been some discussion of late in regard to the Legislative Fiscal Office statements that the State of Louisiana has seen a decrease in mineral income, despite the rising price of oil and growth in the Haynesville Shale. It is their assertion that a major reason for declining revenues is due to untaxed natural gas production in the Haynesville Shale and the belief that drillers are shifting rigs from non-tax-exempt fields in south Louisiana to tax-exempt fields in north Louisiana. This could not be further from the truth.
In reality, oil and gas development in south Louisiana has declined for years due to a variety of production and economic concerns. Drilling that occurs in the Haynesville is for natural gas and companies who operate in the shale are predominantly natural gas operators. These companies, many for the first time, have made the decision to conduct operations in northwest Louisiana from their corporate headquarters in the states of Texas, Oklahoma, Wyoming, and Colorado, among others. Most Haynesville Shale operators have never had major operations in South Louisiana.According to Briggs, any attempt to repeal this severance tax incentive is shortsighted. He maintains that the long-term effects would dramatically decrease growth in the Haynesville Shale — and future revenue for Louisiana.
Current low natural gas prices and high oil prices have shifted competition from pure natural gas shale plays like the Haynesville to shale plays that contain both natural gas and oil such as the Eagle Ford, Niobrara, Anadarko Basin, and Bakken formation. Additionally, Haynesville well costs continue to rise to between $9-12 million, making them some of the most expensive onshore wells to drill in the country.
The amount of severance tax dollars the state receives is dependent on the price of natural gas. However, the severance tax rate is set for the current year, based on the prior year's average price. As the U.S. experienced record-high natural gas prices in 2008, this lead to inflated projections for state collected taxes in 2009 and 2010. Because of declining natural gas prices, the state is now facing a severance tax rate that is half of previous years collection. In the end, future projections of revenue are just that — projections. No one could have predicted the natural gas market drop from $13/mcf in 2008 to less than $4/mcf in 2009.
Additional questions were raised concerning the rate of depletion of Haynesville wells resulting in limited tax revenue. It is important to understand that once a well reaches payout, from that moment on, severance taxes are then paid to the state on all production. If wells are producing at a significant rate and pay out in a timely manner, the state will receive its share of severance tax dollars much sooner.
A chief economist with the state’s Legislative Fiscal Office claims, “For all practical purposes, we may essentially get little or nothing.” This statement is in stark contrast to the actual dollars paid to state and local governments by Haynesville Shale operators.
From 2008-2010, the utilization of Louisiana’s severance tax relief program resulted in the injection of over $13 billion in investment by companies working in the Haynesville Shale. Haynesville developments have brought new dollars to the state in the form of corporate taxes, sales taxes, ad valorem taxes, and new personal income taxes. To date, nearly $1 billion has been paid to local governments, parishes, and the state. In years 2010-2014, it is estimated that Hayneville operators will pay over $1.2 billion in taxes to the state. These numbers are far from “little or nothing.”
Shoppers familiar with Louisiana-based Rouses Market might be surprised when they walk into the new third location set to open at the Corner of Johnston Street and Duhon Road south the Acadiana Mall on Wednesday.
Noted architect and co-founder/principal of Architects Southwest receives highest honor given to former student.
Know an innovator, job creator and visionary with a penchant for hard work? We want to know that person.
If you care about the wellbeing of Louisiana’s college students, vote against Amendments 1 and 2.
A Mandeville media consultant with big name political connections pleaded guilty Monday to a series of federal mail fraud charges.
Despite a decline in global oil prices affecting the outlook for domestic ethylene producers, South African company moves forward.
1,595 rigs were exploring for oil and 332 for gas. A year ago there were 1,738 active rigs.
Prestigious honor annually recognizes a single attorney for excellence in public interest/pro bono work.
JPMorgan Chase is giving $1 million to Louisiana's community and technical colleges, to help with workforce training efforts to match students to available jobs.
Law firm unveils newly renovated 200-year-old building.
UL grad named web developer at BBR Creative
Lafayette-based emergency department staffing and management company raises $120 million in senior credit facilities through GE Capital, Healthcare Financial Services.
High-rise apartment building, parking garage, hotel and retail part of new development.
The number of Louisianans with jobs continued to set records in September, but the state's unemployment rate kept rising.
Louisiana is drowning, quickly.
An investment group led by Macquarie Infrastructure and Real Assets will buy the Louisiana power company Cleco for $3.4 billion.
Local developer’s Lake Charles Gardens LLC purchases buildings and leases; land still owned by Dugas family.
Economist Loren Scott says Louisiana is in the midst of an industrial boom unlike any other in its history, with more than $100 billion in industrial projects either under construction or in the engineering and design phase.
The Louisiana Treasury holds $18 million in Israel Bonds — bonds that earn 2.868 percent when the three-year U.S. Treasury is yielding 1.08 percent.
ABiz celebrates another class of Acadiana's most influential female trailblazers, the Lourdes Foundation honors a local philanthropist and MedExpress in Opelousas celebrates its 22nd year as the “little ambulance service that could.”
Is Louisiana’s O&G industry ready to head south of the border?
Downtown’s newest live-work space for creatives doubles as a gallery for other upcoming artists to show their work.
A maritime case originating in Lafayette federal court could become a game changer for the oil and gas industry.
Here’s what’s at stake in the November Senate race — regardless of whether Republicans gain control of the upper chamber.
From the publisher’s in-box: ABiz reaches out to Lake Charles, time to “Come Home, Louisiana,” and now accepting nominations for Entrepreneur of the Year.