In a recent Associated Press article titled, “Energy tax refund hits state coffers,” the author suggests a large part of the state’s recent budget deficit and lower outcomes for mineral income are a result of companies paying limited taxes through the horizontal well incentive.
First, projected mineral revenues are down significantly because natural gas prices are at an all-time historic low. The amount of severance tax dollars the state receives is dependent upon the price of the minerals being severed from the state. No one could have predicted the natural gas market fluctuation from $13 per 1,000 cubic feet in 2008 to $3.08 today.
The author notes other taxes are paid to the state through the Haynesville development but does not add any detail as to how large that impact actually is for the state. Natural gas extraction operations in the Haynesville generated more than $40 billion in direct and indirect economic growth between 2008-2010. Over that time, the Haynesville Shale has supported more than 100,000 jobs and provided Louisiana with nearly $1.3 billion in local and state tax revenue. Louisiana receives tax revenue in the form of corporate, sales, ad valorem and personal income taxes.
While Haynesville wells are some of the most expensive to drill in the U.S., the state’s horizontal severance tax investment incentive has made Louisiana a more attractive place to do business. Haynesville production is driving investments that seek natural gas for fuel or as a raw material. Many manufacturers are eyeing Louisiana as a viable place to construct plants that make chemicals, plastics, fertilizer, steel and other products. These businesses, like Sasol and Cheniere Energy Partners, will generate thousands of jobs and billions in tax revenue that will far eclipse the amount received from severance taxes.
The Haynesville development has shielded our state from the global recession by generating significant economic growth, maintaining property values and creating thousands of jobs.
Losing the incentive would make Louisiana less attractive in a tough market, resulting in even less overall tax revenue to the state.
Don Briggs, president,
Louisiana Oil & Gas Association