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A survey by the Fraser Institute has ranked Louisiana as the 15th-best place in the world and 10th-best place in the United States to make oil and gas investments among 147 jurisdictions evaluated.

Experts said Louisiana can do better.

“We have to continue creating a positive atmosphere that will attract the oil and gas industry and not deter it,” Louisiana Oil and Gas Association President Don Briggs said. “This happens when individual parishes on up to the federal government realize that increasing government oversight is not the answer.”

The Fraser Institute’s sixth annual survey studied investment barriers, including higher taxes, the cost of regulatory compliance, uncertainty over environmental regulations and other existing regulations, quality of infrastructure, labor availability and skills, disputed land claims and the legal system.

Oklahoma, Mississippi and Texas were named the top three places, not only in this country, but in the world, to make oil investments. Their taxation regime, environmental regulations, clarity over protected areas, cost of regulatory compliance and legal system were more attractive than Louisiana’s, according to the survey.

“So many factors fall into play when looking at the overall picture of an industry like oil and gas,” Briggs said. “However, the litigious climate in Louisiana is stifling to the industry.”

According to a recent survey from the U.S. Chamber of Commerce, Louisiana is ranked 49 out of 50 for its legal climate. That same survey ranked Louisiana second out of 50 for tax climate for new firms — a picture different from the one painted by Fraser.

“The industry has been faced with these so called ‘legacy lawsuits’ where the idea is to litigate first, then regulate,” Briggs said. “This is a direct hindrance to those wanting to invest in the industry. Other factors such as taxes, regulations and politics also play a role in effecting the oil and gas industry.”

The survey noted that Louisiana’s labor availability and skills are the most attractive in the world. It also placed the state’s political stability and fiscal terms as encouragements to investment. Infrastructure, labor regulations and trade barriers were in the middle of the pack.

Louisiana has hovered around No. 15 in the survey over the past four years, but the state and area has continued to attract oil and gas companies. Lafayette Economic Development Authority Director Gregg Gothreaux used Halliburton’s new manufacturing facility as an example of growth.

“It was a competition to bring Halliburton here, and the competition was against other communities in Texas and in other places and that competition was won by Lafayette and the state of Louisiana,” Gothreaux said. “And a great part of it was that they knew that doing business in Lafayette, La., from the experience from other divisions, is beneficial to their bottom line.”

Briggs pointed to Haynesville Shale as an indicator of Louisiana’s prosperity. Haynesville Shale has been the No. 1 producing natural gas field in America for the last four years.

“Around 80 percent of the nation’s offshore oil and gas resources come from or through Louisiana. This is equal to nearly 30 percent of the entire energy consumption for the United States moving along the highways of Louisiana,” Briggs said.

“Looking at these statistics alone, Louisiana is the key player in oil and gas for our country.”

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The latest EIA’s release of natural gas production statistics once again highlighted the surprising resilience of the U.S. gas supply. Despite the dramatic reduction in drilling activity, the Lower 48 production stayed essentially unchanged in May and June. Among notable details, the report shows that Louisiana natural gas production increased in June by 0.25 Bcf/d or 3.0% as new wells came on line and production resumed from some shut-in wells. This follows a 2.0% increase in May, based on the revised data.

The Louisiana data is important as it is dominated by volumes from the Haynesville shale (in my estimate, the field accounts for over two thirds of total Louisiana gas production). While the increase is minor on the U.S. scale, it is nonetheless notable, for two reasons.

Arguably, the Haynesville is the economically marginal field in the U.S. natural gas supply “merit order” and its volume dynamics can be viewed as a barometer of the aggregate gas supply direction. Indeed, if production from a very large economically marginal field (that accounts for close to 9% of total Lower 48 production) is not showing signs of decline, it is difficult to expect volume contraction from more economic fields. In this regard, the EIA report indicates that as of June, the inflection point in the U.S. natural gas fundamentals was yet to be achieved. The report yields no empirical evidence in favor of an imminent price recovery thesis. In June, the market continued to be very well supplied, and therefore the sub-economic price remained necessary to incentivize supply contraction. EIA’s data comes with a two-month lag. However, given the large storage surplus combined with a massive backlog of shut-in production and wells waiting on completion or tie-in, two months would not have been sufficient to turn the situation around. In my opinion, the report supports the view that weak natural gas price environment may persist, most likely through the end of the year.

The Haynesville production data also manifests a striking breakdown in the relationship between production volumes and active rig count that traditionally has been an important leading indicator in natural gas supply models. The Haynesville volumes have remained mostly immune to the dramatic reduction in drilling activity. The field’s rig count peaked two years ago at around 186 rigs and currently stands at 30 horizontal rigs, according to Baker Hughes’ latest (September 7) report. By some estimates, the rig count may in fact be even lower. EXCO Resources (XCO) estimated the number of active rigs at 25 as of August, and at least one scout report put the rig count at 23 as of last week.

Given the steep hyperbolic decline typical of shale wells, one would expect the sharp cut backs in drilling to have already caused the field’s production to roll over. Surprisingly, this has not been the case. The Haynesville volumes did contract by approximately 0.6 Bcf/d during the months of January and February, mostly as a result of massive production shut-ins by Chesapeake Energy (CHK) and EnCana Corporation (ECA), two very significant operators in the field. However, by June half of the lost output appears to have been restored. Additional production volumes are likely to return online during the second half of the year.

Based on my analysis of several operators’ field development economics in the Haynesville, including EnCana, QEP Resources (QEP) and EXCO Resources, it appears that a NYMEX price of $3.0-$3.25 per MMBtu is currently the cost-of-capital breakeven range at the well level within the field’s core. While development economics are improving due to declining service costs in the area and possible proliferation of the longer lateral wells, a higher natural gas price is clearly required to revive drilling activity in the field. In my analysis, development economics become compelling above $4.00 per MMBtu in the field’s best areas.

There is little doubt that with the field’s rig count below 25, and falling, the Haynesville production will soon start showing signs of decline. However the decline is likely to be much slower and shallower than is often portrayed by Wall Street research.

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The hundreds of hotel rooms planned or under construction in Shreveport-Bossier City might be missing their intended clients.

The Times reports (http://bit.ly/NFcnbk) hotel operators had counted on guests in town for business in the Haynesville shale oil field.

But a slowdown of natural gas production has cut into room nights.

More than 1,300 hotel rooms are in final planning phases or under construction in Shreveport-Bossier City. An additional 169 rooms have gone into operation this year in Bossier City.

The 85-room Holiday Inn and Suites and the 84-room Windgates by Wyndham opened earlier this year in Bossier City. Four more hotels in Bossier City and two in Shreveport – with 541 rooms between them – are in the final planning stages.

“Much of that construction and planning began in 2010 when the Haynesville shale was in full swing,” Shreveport-Bossier Convention and Tourism Bureau President Stacy Brown said. “Those are mostly limited-service locations which are interested in capturing a more transient business.”

Oil and gas workers, sports teams and travelers passing through town make up some of that expected business, Brown said. They generally are less interested in hotels with meeting and office space, looking simply for a place to sleep.

Shreveport-Bossier City hotel occupancy in June was reported at 61.6 percent. Occupancy in June 2011 was 79.20 percent, the highest level for the month since at least 2004.

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The key argument often used by natural gas bulls is that the dramatic reduction in rig counts in the dry gas producing shales will translate into a rapid drop off in supply and lead to the price recovery toward the $5 level, and possibly higher. The Haynesville shale, where the rig count has declined from the peak of over 180 rigs two years ago to approximately 27 currently, is often presented as the most compelling evidence supporting that argument.

The view has been advocated by several prominent industry CEOs, including Chesapeake’s Aubrey McClendon and Ultra Petroleum’s (UPL) Michael Woodford. During Ultra’s 2Q earnings conference call on August 2, Michael Woodford re-iterated his macro perspective on natural gas: “Capital is being withdrawn from natural gas investment as seen in the rig count reduction and pressure pumping softness. Production lags capital expenditures and the decline in production is imminent. We see $4 gas in 2013 and $5 gas in 2014.” With regard to Haynesville specifically, he commented: “We have a view that says: production supply is about to shrink pretty rapidly. I think there are some comments out yesterday, with some companies that announced and talked about the Haynesville, that they would see a 10% per quarter reduction in their production. I think it is plus or minus 40% for the year. If you apply that to the 6 Bcf per day of Haynesville production, it is 2.5 Bcf per day of annual rate reduction, so I think we are about to see a drop off in supply.” Michael Woodford was referring to the earnings call remarks by QEP Resources (QEP) the night before.

2.5 Bcf per day is a big number, particularly given that Haynesville is just one producing field of many, albeit a significant one. If that rationale held, the $5 natural gas outlook would probably be conservative. However, a more rigorous look at the Haynesville operating data leads to somewhat different conclusions.

In less than four years since its discovery announcement, the Haynesville production went from zero to almost 7 Bcf per day, by some industry estimates, or over 10% of the total US natural gas production, demonstrating the exceptional productivity of this field as well as the scalability of the supporting operational infrastructure including oilfield services, gathering systems, and pipeline off-take. The rig count peaked at about 186 rigs during the summer of 2010 but has been in a steady decline ever since. There are currently approximately 27 rigs working in the play, about evenly split between the Louisiana and Texas portions of the play. Of these rigs, approximately 11 rigs, including 8 run by Anadarko (APC), are focusing on the liquids-rich part of the Haynesville, mostly in Panola County of Texas. The other approximately 16 rigs are targeting dry gas.

Based on the analysis of the well distribution profile by vintage, I estimate that the field-wide base production decline is currently in the 2.5%-3.0% per month range. Applying the decline rate to the estimated base production of 6.5 Bcf/d, the base production drop off equates to 165-195 MMcf/d per month. How many new wells per month would it take to offset the base decline?

For illustrative purposes, let’s assume that half of all wells are being completed in the liquids-rich area or in the less productive Tier II part of the play (to hold acreage) with an average first-month restricted dry gas flow rate of 4.5 MMcf/d per well, while the other half of the completions are concentrated in the dry gas sweet spots and flow at an average first-month restricted rate of 7.5 MMcf/d (my analysis of recent completions data leads me to believe that these assumptions are conservative). This translates into a total of 27 to 33 wells that need to be put in-line per month to maintain the base production flat. In a pad development mode, one rig can yield as many as 10 wells per year. In the delineation mode, rig productivity is lower and I assume a yield of 8 wells per rig-year. These calculations result in a total of 36 to 45 rigs required to keep the production flat, assuming no completions are deferred. These figures will likely decline with time as the operational productivity and completion techniques continue to improve.

The graph below illustrates this analysis. It shows the number of wells added to the “producing” category for the past two years in the Louisiana part of the play (the Louisiana Haynesville data are more available and consistent than the Texas Haynesville data). During that period, the producing well count in the Louisiana Haynesville went from approximately 570 at the end of July 2010 to approximately 2,038 at the end of July 2012. Data is subject to frequent adjustments and reporting delays and therefore should be thought of as approximate. The red line on the graph shows the calculated number of wells that would have been required to be brought to sales during each month in order to keep the Louisiana Haynesville production flat at that time.

During the period from August 2010 through January 2011, the number of new producing wells averaged over 70 per month, or four times the minimum number of new wells required to keep the production flat. As a result, during that period the aggregate production from the field showed strong growth.

Well additions slowed in February 2012 and crossed below the minimum required new wells line in June, for the first time since the field’s inception.

The analysis implies that the field’s production should have grown all the way through May 2012, although the growth pace would have slowed substantially at the beginning of the year. In actuality, Haynesville pipeline deliveries peaked in November-December last year, with the field’s production declining by approximately 0.4 Bcf/d during the first quarter. The difference to the model is explained most likely by the January 2012 decision by Chesapeake (CHK), the largest operator in the field, to curtail as much as 1.0 Bcf/d of its Haynesville and Barnett production throughout the year, with as much as 0.5 Bcf per day curtailed in January or possibly even earlier. Also in January, Chesapeake announced the decision to defer new well completions and pipeline connections whenever possible. Other operators may have joined Chesapeake with similar measures as natural gas prices continued to roll over.

Another important factor in this equation is the inventory of wells waiting on completion or pipeline connection. In the Louisiana part of the play that number stood at approximately 250 wells at the end of July 2012, according to Louisiana Department of Natural Resources (LDNR). In light of the math presented above, this is a significant backlog. Assuming for illustrative purposes that 100 wells, or 40% of the total inventory, will be brought to sales within the next 12 months, the rig requirement is effectively reduced by approximately 10 rigs during that period. While the backlog in the Texas portion of the field is difficult to estimate, it is clear that it is also sizeable.

The staggering conclusion of this analysis is that the 27 rigs currently working in the Haynesville, in combination with some reduction in the drilled but not producing well backlog and the unwind of the production curtailments, may be sufficient to keep Haynesville production at its current level for at least a year, or even longer.

The natural gas industry needs the Haynesville and other dry gas fields to reduce their contribution to the total supply so that the rapid production growth from the more profitable liquids-rich areas can be accommodated. Therefore, more rigs must go on the sideline in the Haynesville and elsewhere so that the production can show tangible declines. That is unlikely to happen with natural gas prices above $4. At that price, dry gas sweet spots in the Haynesville can deliver solid returns (30%+ IRR at the well level, in my estimate). The liquids-rich part of the field will be even more profitable. In addition, the economics of the play will likely continue to improve, due in part to the lower services cost, but more importantly, as a result of the better wells being drilled. Encana (ECA) reports that it has already reached its cost of supply target in Haynesville and can drill economic wells (9% rate of return) even at $3 Henry Hub.

With the well productivity like in the Haynesville, $5 natural gas may not be a realistic economic assumption for the foreseeable future. $4 may also prove to be unsustainable, despite the recent strength of the forward curve.

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The pace of things is a little slower in Mansfield these days.

The drive across town feels a little shorter, the line at the gas station takes a little less time and the parking lots are less crowded every day.

“It’s really been a tremendous change since February,” said Shelby Spurlock, co-owner of Café 171 in Mansfield in northwest Louisiana. “It’s gotten to the point where we wonder if we can keep the doors open or not.”

Café 171 opened in September 2010 when Spurlock and her business partner, Rebecca McDaniel, started serving country cooking aimed at the droves of oil and natural gas workers meeting the booming demand on the Haynesville Shale.

And for almost two years that eatery just inside the DeSoto Parish city’s limits had a house packed with roughnecks, surveyors, supervisors and anyone else working the nearby rigs.

“I just don’t know how long we can hold on,” Spurlock said. “The way things are falling, every day we get closer to nothing.”

The price of natural gas has fallen to dramatic lows over the past six months.

Since 2009, the words “glut” and “overproduction” have been floating around the oil and natural gas industry, said Ragan Dickens, north Louisiana director for the Louisiana Oil and Gas Association. When things really turned sour is a matter of whom you ask, he said.

In 2008, 82 percent of U.S. rigs were producing natural gas while prices ranged between $8 and $12 per million British thermal units (MMBtu), according to Louisiana Oil and Gas Association President Don Briggs. Now only 27 percent of rigs are producing natural gas and prices are near $2.70 per MMBtu. Those prices will need to return to at least $4.50 per MMBtu before serious activity is expected to return to the Haynesville Shale, Briggs said.

“Companies can’t drill for natural gas at these prices,” Briggs said. “But it’s important to understand the Haynesville Shale will continue to be a major supplier of natural gas for our country for at least another 10 to 15 years. It’s still the largest discovery in the United States.”

Meantime, Briggs said, oil and natural gas companies will be seeking more lucrative activity on liquid-rich plays, particularly the Eagleford Shale in Texas. And they’re taking their workers with them.

That’s the way things go, said Mansfield’s B-N-L Tire and Auto Service owner Greg Dyess. “I’ve been here 16 years, and I’m used to the ups and downs. That’s business, but we’re still going to be around.”

For about four years Dyess said his business saw a boost from outfitting trucks, trailers and other vehicles working the Haynesville Shale. He’s seen a significant drop in business recently but said local customers always have been his foundation.

“I figure it’ll be back up again eventually,” Dyess said. “Once the prices get up, it’ll be back again.”

In Bossier City, Key Energy district manager Buddy Terry said there’s hardly enough work hauling “fracking” water to go around. “The only thing that’s going to help anyone is the price of natural gas going back up,” he said. “We had to make a change. Our yard wasn’t making the kind of profit we need to stay in business.”

And while there were no layoffs, Terry said, several supervisors were offered positions as truck drivers while business is slow. They left for other companies, he said.

Other trucking and supply companies have packed up and moved on. The reduction in competition has helped, Terry said, but things still are slow.

And the impact goes beyond those directly employed in the oil and natural gas industry.

From a peak of 60, the number of residents at Davidson RV Park in Mansfield has fallen to 12, owner Robert Davidson said. About 90 percent of that loss pulled out over one week in March, he said.

Since opening in 1978, Davidson said, his park has never been so empty as without the oil and gas workers. “With what I’ve got, I’m not making much at all,” Davidson said. “I’m not griping, though, because the past few years have been so good. I didn’t blow all my money, put it that way.”

Chesapeake Energy Corp. employee Tim Farrington has watched as many of his co-workers and competition moved on from Mansfield to more active oil and natural gas plays.

“It’s kind of sad now,” Farrington said. “It’s slowed down quite a bit, and nobody saw that coming. You see it all over town from traffic to housing. Everything was coming here for a long while,” he added. “But we still have the basis for production, so it’ll be easy for it come back.”

Farrington has eaten at Café 171 at least twice a week for almost two years. At its peak, Spurlock said, the restaurant was feeding 160 to 250 people a day. Now a majority of the tables remain empty even through the lunch hour.

“I can’t say if we’ll have enough support just from the locals,” she said. “We’ll either have layoffs or we’ll close the doors. We’re just trying to hold out until (natural) gas prices go back up.”

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Over-reaching by federal regulators and local governments could stop the Tuscaloosa Marine Shale from ever booming in Louisiana and shift drilling activity to the Mississippi side of the oil-rich formation, Louisiana Oil and Gas Association Vice President Gifford Briggs said Thursday.

The Environmental Protection Agency has been trying to take control of the hydraulic fracturing permitting process from state governments for a long time, Briggs said.

The energy industry fears that any allegation of a problem could result in an instant ban on hydraulic fracturing, the same way that federal regulators placed a moratorium on offshore drilling after the BP well disaster.

“That would give the federal government the ability to shut down the oil and gas industry in the state with the swipe of a pen,” Briggs said. “That is very terrifying, and that is a very real concern that industry has.”

Briggs spoke at the Greater Baton Rouge Industrial Alliance’s annual meeting.

Most wells are drilled using hydraulic fracturing, where millions of gallons of water, mixed with sand and chemicals, are forced underground under high pressure to crack rock formations and release natural gas or oil. Environmentalists and some residents say the practice could contaminate surface water and water tables. There are also concerns about the enormous amount of water used in the process — a Colorado State University study found the average horizontal well in that state used 2.7 million gallons of water — and the effects of disposing wastewater from fracking.

Briggs said federal regulation would likely increase the time and the cost involved in drilling a well.

Meanwhile, Louisiana’s continuing budget shortfalls could mean the end for the severance tax break that drillers get for horizontal wells, Briggs said.

In 1994, Louisiana made horizontal wells exempt from severance taxes until a company recovers the cost of the well or for 24 months, whichever happens first.

At the time, the technology was fairly new, and legislators were trying to encourage drilling. In 2010 and 2011, the exemption meant that Louisiana didn’t collect around $300 million in severance taxes.

The energy industry says it creates billions of dollars in economic activity and investment, which generates tax dollars in other ways.

The Haynesville Shale, for example, had $31 billion in economic impact during the past two years, creating more than 60,000 jobs, Briggs said.

Briggs said he expects the tax break will be the No. 1 target in the next legislative session, even though Louisiana’s economy is heavily dependent on the oil and gas industry.

Drilling is already practically impossible in the Haynesville Shale, due to depressed natural gas prices, Briggs said. Without that incentive, the cost of drilling goes up incredibly, making it even less likely that drilling will take place, and the same goes for the Tuscaloosa Marine Shale.

Finally, drilling companies face problems at the local government level, Briggs said.

Once the Haynesville Shale got going, every local government wanted to create its own well permits, fees, road-use taxes and everything else to capitalize on the boom, Briggs said.

“And I’m sure those parishes in the Baton Rouge area, when they looked at what was going on, they said, ‘Well if we can just get that kind of activity and that kind of economic growth in our area we would do anything,’ ” Briggs said. “Well the Tuscaloosa shows up, and now all of a sudden we’ve got local ordinance issues in every parish that we’ve never had before.”

The local issues vary wildly, Briggs said.

In Beauregard and Vernon parishes, there were efforts to ban hydraulic fracturing. Other local governments have asked drillers to disclose the chemicals used in hydraulic fracturing, he said.

Many of the proposed ordinances duplicate state regulations, while others would make drilling companies repair road damage; the industry is willing to pay for repairs, but oil and gas companies don’t have expertise in road repair.

Briggs said all of these challenges could mean that the much-anticipated Tuscaloosa Marine Shale boom might never materialize.

Drilling companies have an option, he said. They can just move their operations to the Mississippi side of the formation.

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While Pennsylvania, northwestern Louisiana and gas-rich areas around the Gulf of Mexico are losing jobs and revenue as the fracking industry shrinks after a price collapse, oil-rich North Dakota and Texas are in the midst of a boom.

Other winners in the fracking lottery include central and southern Louisiana, Mississippi, Ohio and Wyoming, where the economy is expanding and revenues are climbing.

As oil prices are expected to stay around $100 a barrel for at least a couple of years, the success of these states may last longer. But the high volatility of energy prices may give local economies a headache.

With natural gas prices touching 10-year lows three weeks ago, there could be more pain ahead for gas-rich communities and states where fracking was until recently a growth industry.

The forerunners in fracking natural gas are a case in point.

Parts of northwestern Louisiana, where the Haynesville shale is located, already have been hit as gas rigs left. In Bossier City-Parish, one of the communities in the Haynesville area, the rural district tax revenue fell 25 percent to $2.5 million from January to April, according to tax administrator Ken Kirspel.

Economists warn that this type of reduction in local revenues could spread throughout Lousiana as natural gas output falls, cutting more jobs and revenue.

In the last two years, the oil and gas extraction industry added 36,000 jobs around the nation. Most of those jobs were in natural gas fracking, according to Dean Baker, an economist with the Center for Economic and Policy Research, in Washington, D.C.

Those jobs could move elsewhere, other experts said.

Fracking is a drilling technique that extracts oil and gas from shale by blasting it with water, sand and chemicals. Environmentalists have raised concerns about possible air and water pollution. Due to these concerns, Vermont is set to ban fracking, and New York has placed a moratorium on it.

How many jobs will be lost in gas production and gained in oil drilling is difficult to estimate, economists say, but local communities in gas-rich areas will feel the pain.

The estimated number of jobs lost could reach 72,000 – or double the jobs added during the fracking boom, said Baker of the Center for Economic and Policy Research. This assumes that each fracking job created one more job in related areas, such as trucking and steel manufacturing, and in other sectors, from hotels to shops, where oil and gas workers spend their wages.

GOODBYE GAS, HELLO OIL

The decline in gas rigs happened swiftly in Louisiana’s gas-rich Haynesville shale. The number of rigs has dropped to about 40 from over 140 over the past 18 months, said Don Briggs, president of the Louisiana Oil and Gas Association.

“These rigs are moving to Texas or other places to drill wells … for oil instead of natural gas,” he said.

Caddo Parish, which enjoyed the fracking boom, is getting squeezed now. Sales tax revenue fell 18 percent in 2011, and has kept slipping this year, said Erica Bryant, director of finance. “We will have to monitor the situation to determine its effect on our operations.”

Some of the economic damage comes from the lost payments that landowners hoped to get from drilling companies.

Suzanne Stinson, the court administrator for Bossier Parish, said a company that leased property from her family for three years has not renewed the contract.

“It didn’t come as a surprise to us,” she said, noting other landowners had the same experience.

The metropolitan area around Shreveport, a Haynesville drilling hub, had 6,800 mining and logging workers in March 2012, down from a year-ago peak of 7,200, according to the Louisiana Workforce Commission.

The state’s severance tax, its natural resource levy, has yet to recover from the Great Recession. It only produced $764 million in 2011 versus a 2008 peak of $1.047 billion. The state’s budget last year was about $25 billion.

Natural gas drilling could remain depressed for a couple of years, economists say, because that is how long it could take to work off the oversupply created by fracking.

The price of natural gas has fallen to about $2.50 per million British thermal units from around $13.70 in July 2008. Output fell in February, and the decline was the bigger of two monthly drops in 12 months..

Drillers have reacted. The number of gas rigs fell last week to 598, the lowest in a decade. Yet the total number of oil rigs rose to 1,372, a 25-year high..

Pennsylvania, which opened its doors to fracking, has started to see gas rigs leave the state. The number last week fell to 95 from 108 a year ago.

“I think Pennsylvania will see some moderation and there probably will be some short-term adverse effects on jobs,” said Eric Smith, a professor at the Tulane Energy Institute, in New Orleans.

The state, whose oil and gas revenue leaped to $419 million in 2011 from $176 million in 2006, could see that windfall shrink as more rigs leave, economists said To put that figure in perspective, the state’s budget last year totaled $27 billion, with gambling alone producing $1.4 billion in 2011 tax revenues.

NORTH DAKOTA’S OIL RUSH

Many rigs have moved to North Dakota because of its oil-rich Bakken shale formation.

Its mining and logging sector rose to 21,000 workers in March 2012 from 15,500 in December 2007, and its oil output topped California’s in January. Economists expect more gains.

North Dakota’s oil production in January averaged 546,284 barrels a day and “I think it’s very realistic to assume this becomes a million barrels-a-day production,” said John Harju, associate director for research at the University of North Dakota’s Energy & Environmental Research Center in Grand Forks.

The state’s 3 percent jobless rate could fall further, and might even be lower in a few drilling hotbeds, like Williston.

“There’s no unemployment here, everybody’s home values have gone up, but at the same time, there is a lot more traffic,” said Tom Rolfstad, the town’s economic development director.

North Dakota’s oil tax revenue – which totaled $1.027 billion from July 1, 2011 to March 3, 2012 – is expected to keep rising. Its budget is about $4.2 billion.

The state is aiding its booming localities, planning to send them about $1.2 billion by the time its two-year budget ends on June 30.

“They certainly have been our Big Brother through this whole thing … but it is kind of hard to keep up,” Rolfstad said.

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Louisiana is known as the oil and gas state of our country. Around 25 percent of the oil and natural gas that fuels our country flows through the pipelines of Louisiana, while 50 percent of the gasoline and diesel fuel that drives the engines of our country flows out of Louisiana. North Louisiana is also home to the most productive natural gas field in the country, the Haynesville Shale.

While these statistics sound very encouraging, the industry is currently experiencing a statewide rapid decline due to crashing natural gas prices and being exacerbated by Legacy Lawsuits.

Recently, the LSU Center for Energy Studies released a report on the effect of Legacy Lawsuits on conventional oil and gas drilling in Louisiana. To date, more than 270 Legacy Lawsuits have been filed with more than 1,500 defendants.

The LSU study estimates that Legacy Lawsuits have led to the loss of nearly 1,200 new wells in Louisiana, translating to an astonishing $6.8 billion in lost drilling investments. When drilling decreases, jobs are lost at a rapid rate. So while the court-sanctioned extortion, also known as Legacy Lawsuits, is taking place, more than 30,000 jobs have been lost, according the LSU study.

Sen. David Vitter has made a plea for each side to work together on the issue of Legacy Lawsuits. He stated recently in a news release on the matter, “The current stalemate over the legacy lawsuit issue actually favors one side, the continued “bonanza” benefitting trial attorneys who often seek millions more in damages than required cost to clean up the contaminated land.”

Thus far, the trial lawyers have made it an all out battle between landowners and the oil and gas industry. Whoever is to blame, the bottom line remains the same — the negative effect on drilling in Louisiana is astronomical due to these frivolous lawsuits.

Scott Sinclair, president of Tensas Delta Exploration Co., says that the Legacy Lawsuits are “crippling his company’s operations.” TDE is facing five Legacy Lawsuits with one of the plaintiffs seeking $133 million in damages, when cleanup estimates have come in at only $500,000.

TDE owns property in Catahoula and Tensas parishes, where 126,000 acres of their land is not being developed directly due to these Legacy suits.

Currently, several bills are before the Louisiana Legislature regarding Legacy Lawsuits. Both the landowners and the oil and gas industry are backing bills to attempt to mitigate this ongoing problem.

Thus far the trial lawyers have succeeded in using various landowner groups as a shield to prevent reasonable solutions to the legacy issue. While the Legacy Lawsuits seem to have no end in sight, the burden on oil and gas companies will continue to grow until this problem is corrected.

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