-

NEW ORLEANS, La – A new study, commissioned by the Louisiana Oil and Gas Association, estimates that Louisiana would lose out economically over the long-term if policymakers discontinue the horizontal well severance tax incentive. But out of state industry figures have suggested that the incentive’s repeal would help close the state’s $1.6 billion budget gap.

Dave Meloy, an oil and gas consultant based in Colorado, is one such critic. He has argued that the tax incentive does not have any appreciable impact on drilling activity and is overly costly to Louisiana.

“Eliminating this incentive now will increase Louisiana’s revenue by $120 million per year for the next 40 years,” Meloy wrote. “From the beginning, oil and gas operators have needed no encouragement to drill for the Haynesville Shale. Haynesville Shale leasing activity has been called a modern-day gold rush.”

Dr. Loren Scott, author of the report and a former economics professor at Louisiana State University disagrees. Repealing the incentive would actually cause state revenues to decline, not increase, Scott concludes in his LOGA study.

State lawmakers created the tax relief program in an effort to spur unconventional oil and gas drilling and discovery efforts. The incentive is built around a two year severance tax exemption for horizontal and deep well operators

After examining the Louisiana Department of Revenue’s tax exemption budget data in 2010, Scott estimated that the state gave up $125.3 million, but gained $367.7 million.

“Thus, for every dollar of severance taxes given up under the horizontal incentive the state gained $2.94 ($367.7 million divided by $125.3 million) in revenues to the treasury, and the state got $16.9 billion in business sales, $4.3 billion in new household earnings, and 111,329 jobs to boot,” he writes.

Unfortunately for Louisiana, Scott notes, the recently discovered Haynesville Shale, located in the Northwestern portion of the state, sits at a competitive disadvantage.

To begin with, Haynesville wells tend to be deeper in comparison to those in other areas such as the Marcellus Shale located in the Appalachia region, which adds to the cost of drilling. Furthermore, the Haynesville operation includes mostly dry-gas production. This presents a challenge because oil prices are rising, while natural gas prices have remained steady.

Kevin McCotter, vice-president of corporate development and government relations with the Chesapeake Energy Corporation, anticipates that Louisiana will experience strategic gains over the next few decades that will balance out initial costs of the tax incentive.

“Development of natural gas in unconventional reservoirs like the Haynesville and Bossier Shales is a capital intensive process using new horizontal drilling technologies,” he says.  “A typical Haynesville well can cost between $8.5 – $10 million dollars.  With over 1000 wells already drilled and completed in the Haynesville, and thousands more to be drilled over decades to come, Louisiana is poised to take advantage of a renaissance in natural gas.”

Removing the tax incentive would only “sharpen Haynesville Shale’s competitive disadvantage and hasten the movement of exploration firms from the area,” Dr. Scott warns.

“Think of the Louisiana economy like one large economic pond,” Scott writes. “Into this pond is dropped a rock of $11.5 billion by the Haynesville Shale direct spending. That rock is so big that it makes quite a splash on its own. However, once hitting the pond it causes ripple effects out to the edge of the pond, creating new jobs in construction, retail trade, health care, etc. – what economists call the multiplier effect.”

Between 2008 and 2009, exploration companies spent $11.5 billion that was directed into the Louisiana economy, according to the study.

“Every natural gas drilling rig operating in the Haynesville is responsible for 180 direct and family-sustaining jobs in our economy,” McCotter said.  “The multiplier effect is enormous with contractors and other jobs created in other sectors of our economy.  In 2009 alone, the Haynesville was responsible for over 57,000 jobs, almost $1 billion in state and local tax collections, $10.6 billion in new business sales within Louisiana and nearly $5.7 billion in household earnings, including $957.3 million in lease payments and $305.9 in royalty payments.”

These results demonstrate that the tax incentive is fulfilling its policy objectives, McCotter added.

Original Article

-

By Katarzyna Klimasinska

Jan. 13 (Bloomberg) — The overhaul of U.S. oil-drilling regulations, while “far from complete,” won’t slow the review of applications from producers seeking to resume exploration in the Gulf of Mexico, the industry’s regulator said.

“We will implement reforms necessary to make offshore oil and gas production safer,” Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said today in a Washington speech. “The processing of drilling permit applications and proposed drilling plans will not be delayed while these additional reforms are developed.”

The agency has yet to issue a permit for the type of exploration banned by a moratorium on deep-water drilling imposed after the April 20 blowout of the BP Plc well off the Louisiana coast. At stake is development in a region that produces more oil than the U.K., Qatar or Indonesia, and pumped $35.3 billion in crude in 2009.

The Obama administration will add measures regarding blowout preventers, remotely operated vehicles and workplace safety, Bromwich said in his speech.

Bromwich sought to tamp down what he called “significant anxiety” among companies, trade groups and lawmakers concerned that the agency has other requirements “up our sleeve.”

“Barring significant, unanticipated revelations from investigations into the root causes of the Deepwater Horizon explosion that remain in process, I do not anticipate further emergency rulemakings,” Bromwich said in his remarks.

The regulator isn’t delaying permits until the second half, Bromwich said, answering a question about whether the agency will wait until the third or fourth quarter. He didn’t elaborate on the timing of issuing permits.

The agency is “thoroughly reviewing” the report of the National Commission on the BP Deepwater Horizon Oil Spill, which recommended further reorganization of drilling oversight in its findings published Jan. 11, he said.

Original Article

-

By Stephanie Gleason, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The Environmental Protection Agency has the authority to regulate natural gas drilling and is committed to doing so, EPA Deputy Administrator Robert Perciasepe told a Senate committee Tuesday.

“We are taking action,” Perciasepe said. “EPA’s responsibility in oversight is one we are pushing forward in a very strong and strenuous way.”

Hydraulic fracturing, a practice of drilling for natural gas, is exempt from some environmental laws, but he said that the EPA is able to regulate natural gas drilling through federal clean water regulations.

“If improperly managed, natural gas extraction and production, including hydraulic fracturing…may potentially result in public health and environmental impacts,” Perciasepe said.

Congress has asked the EPA to do additional studies of hydraulic fracturing, saying regulators don’t have all the information needed to make a decision about natural gas drilling.

“Given the array of potential impacts and the need for more study, the state of New York is taking a timeout on hydraulic fracturing,” Senate Environment and Public Works Chairman Barbara Boxer (D., Calif.) said.

Sen. Robert Casey, (D., Pa.), whose home state is experiencing a wave of new gas exploration, has proposed new regulations for natural gas drilling.

“It’s very simple; we’re trying to close a loophole that’s in the law now,” Casey said. His legislation would change the Safe Drinking Water Act to make sure new natural gas drilling methods are covered by the environmental law. The legislation also would require disclosure of the chemicals being used in the drilling process.

Sen. James Inhofe (R., Okla.) said there hasn’t been a confirmed case of groundwater contamination. The U.S., he said, could run for 90 years on natural gas and reduce U.S. dependence on foreign oil, “but you can’t get natural gas from these deposits without hydraulic fracturing.”

Sen. John Cornyn (R., Texas) was also critical of new gas exploration regulation, saying more “red tape is death by a thousand cuts” for the natural gas industry.

Original Article

-

MANSFIELD — Drilling activity connected to the Haynesville Shale continues to pump up sales tax revenue into DeSoto Parish, a hotbed of natural gas exploration.

Sales in February, which are reflected in the March tax report, topped $9.1 million — a 43 percent increase over the same time period last year. January sales reported in March reached $8.2 million, a 20 percent increase.

Both months are lower than December’s $12 million — although Christmas retail shopping is figured into those receipts.

Since July 1, more than $86.9 million in sales taxes has been collected parish-wide. That’s quadruple the amount realized in pre-Haynesville Shale days.

Schools and teachers have been among the beneficiaries. At a time when many parishes in the area are tightening their belts, DeSoto teachers have been given pay raises.

Original Article

-

BY TODD C. ELLIOTT

Natural gas fueling stations for vehicles are coming to the Lake Area.

Private business owners and local government officials on Wednesday discussed the implementation of compressed natural gas stations for local fleet vehicles in Lake Charles and Sulphur.

“In order to get that program to really get kicked off you have to get buy-in from the locals,” Lake Charles Mayor Randy Roach said.

“Local trucking companies and a lot of your other fleet companies that are involved in transportation have got to be a part of this for the program to be successful.”

Grant Bush, transportation director for the Imperial Calcasieu Regional Planning and Development Commission, organized the panel discussion to introduce Chesapeake Energy of Shreveport to local private and government officials.

“It’s time for us to look at this,” Bush said. “As we start to see gas and oil — that energy source — become more difficult for us to get and use, we need to look at some things like alternative fuels. And compressed natural gas looks like the one to really look at because of its cleanliness and abundance.”

Bush said that, as alternative fueling stations move in, the time is now to start planning for the future. He noted that Lafayette Parish is nearing completion of the first phase of developing three

CNG fueling stations for public vehicles such as city and school buses.

Bush said the plan for Calcasieu Parish will be based on the New Braunfels, Texas, program, which combines fleets of public and private vehicles that will run on compressed gas.

Bush said he hopes to unite the city of Lake Charles’ 27 fleet vehicles with those of other cities, like Sulphur and Westlake, and private businesses to form an “anchor fleet” to validate having two fueling stations in the area. Converting school buses, city buses and fleet vehicles in the parish to compressed gas will cut the entities’ cost of fueling and maintenance by 50 percent, according to Bush.

Mike Hollier with the Lafayette Consolidated Government said that cityparish is about to open bids on its first fueling station.

“We have five city buses arriving in the next couple of months.  These buses arriving in June will travel 800 miles per fill up,” Hollier said. “We’re converting 40 Lafayette Consolidated Government vehicles to compressed natural gas in addition to the five buses.”

Hollier also said Lafayette Independent School District and the University of Louisiana-Lafayette are waiting to see how the government will manage the operation and then will begin their fuel conversions.

Byron Hardy, senior market consultant of Centerpoint Energy in Lake Charles, said that Centerpoint will play a pivotal role in the development of compressed gas stations in the area. The company already uses its own natural gas fueling station for some fleet vehicles, Hardy said.

“We believe that CNG is going to be the key to our fuel independence,” Hardy said. “We’re very happy, and we think that it’s a good possibility that we’ll be able to grow as a company, and also the area will grow and get the benefits of an American domestic fuel.”

Hardy said Centerpoint Energy considers itself a partner with Chesapeake Energy — which provided a presentation at the conference on Wednesday— in helping to expand the ability and use of compressed gas.

Sarie Joubert, a spokeswoman for Chesapeake Energy, said the company promotes using natural gas in vehicles nationwide and is converting its entire fleet to run on CNG.

“As a corporation converting their vehicles, we certainly have many positive, optimistic things to say about it,” Joubert said. “An investor that builds out the CNG at the fueling location knows that he will be profitable based on the anchor fleet that is agreeing to fuel there.”

Joubert said there are more than 13 million natural gas vehicles worldwide, and more than 130,000 CNG vehicles operate in the U.S. today.

Fewer than 500 fueling stations are operating nationwide, according to the cngnow.com   website.

Sulphur Mayor Chris Duncan was on hand to discuss the conversion of vehicles as a parishwide effort.

“We actually have a couple of people in the Sulphur area that would like to open these types of stations, but there again it is a supply-anddemand thing,” Duncan said. “The cost factors on building these type of operations and converting your fleet is high right now.”

Duncan said that, as opposed to retrofitting vehicles, major auto manufacturers need to roll CNG vehicles off of the assembly line to help cut the costs of the conversion.

Duncan said a site near I-10 in Sulphur has been proposed for use

as a compressed gas fueling station.

Original Article