We hear a lot about how expensive it is to drill wells and if it's a dry hole, the company is out a lot of money. But, what we're not told is that there is a dry hole tax relief program in effect in Louisiana, which the Louisiana House of Representatives proposes to extend to June 30, 2011.
See uploaded HB 1026. There are other tax breaks E&P gets, for example, deep wells like the HS horizontal wells, get some tax break. Can't help but wonder how much if any of that is passed along via the "trickle down" economic theory.

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looking for contreversy on this beautiful day??

Read the bill, only can twenty wells qualify, AND they must be on state land. They intent is simple, encourage drilling on state land. Also, they wells had to be started in 2005, and no new wells completed after June 2009 can qualify.


Also, they tax break for HA wells is for severance tax relief (it applies to all horizontal wells, there is aslo a similar break for deep wells) This helps the RI just as much as the WI.
thanks B. But it is still a tax relief credit, i.e., the dry hole driller deducts the expenses from income from other successful wells, right?
the idea is that hopefuly there will be more succesful wells... not just an abandoned lease. You obviously havn't sunk half a mil into a worthless hole in the ground.
I wouldn't assume that I haven't!!
Baron,

I have a working interest in 9 Haynesville Horizontal wells so far and I was wondering what type of tax break I will be receiving for the fiscal 2010. I live in Oklahoma and I know different states have different tax laws. I know you are very familiar with Louisiana laws, you wouldn't happen to have any advice for me would you?
I can not speak for you personal tax liability, I myself do not have the ability to do my own taxes....

However, With the severance tax relief program, an operator (and most of the majors are applying, I would hope any prudent operator would) can apply for an exemption from state severance taxes on production until 1) two year have elapsed or 2) payout of the well, whichever occurs first.

The impact to you is that on your royalties, you will not have any severance taxes deducted. (They may at first, as the state encourages operators to wait to appy until all cost are known, as no estimated or AFE costs can be used, only actual expenses).

By the way, the current rate for serverance tax on gas is $0.331 per mcf. So you are basically gaining that much per mcf on your check.
That's good information to know. As always, thanks for your input. Now all I need is higher nat gas prices. With everything going on with the Gulf, are you getting a tad bit more bullish regarding prices?
Personally, I don't think the spill will directly effect production.

However, if Obama gets his way...and shuts down drilling...
Yeah I don't think the spill will directly effect production, but I don't see how the 6 month moratorium in the gulf wouldn't effect gas prices overtime. How long of a lag time do you forsee before production output drops dramatically. I noticed on the Baker Hughes Rig Count, the operators pulled 20 rigs alone last week.
Thats what I mean. I don't expect the spill to reduce our gas supply in the near term. It is the long term consequenses of Obama's enrgy policy that I worry about.

I also believe that Obama's proposed elimination of IDC's are a bigger threat to the domestic O&G industry than any moratorium
Good ole Obama. I have close friends who are big on taking leases, wildcatting and that sort of thing back in Oklahoma, I know they plan on possibly getting out of the business all together if Obama eliminates the IDCs. I wouldn't think it would affect the Haynesville as much though due to the low risk nature of the core area. Any thoughts on this?
I am still trying to figure out the point of this post?

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