Replies to This Discussion

Permalink Reply by essay on December 20, 2011 at 23:35

so what's your solution, get rid of the exemption so we can keep subsidizing english teachers and psychology majors?

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Permalink Reply by Hopeful About Natural Gas on December 21, 2011 at 0:21

I don't know much about O&G research and development tax breaks - but I have worked on other R&D technology tax breaks at the state level. This severance tax exemption was passed to help the new technology of horizontal drilling?

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I think that tax exemptions for developing new technology should ALWAYS be sunseted (expire in a specific time frame) Then, if the need and value to the taxpayers is still there the exemption can be renewed.  You are just giving away taxpayer's money any other way.

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Besides, every few there are new technologies coming along that deserve r&d money and if one group gets it then others should be able to ask for it as well.  However, a case could be made to eliminate ALL tax breaks and let the free market decide what technologies will survive.

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When was anyone going to review it to see if it needed to be kept to help the development of horizontal drilling? There may be good economic reasons to give a tax break to Haynesville producers but it's not because they still need help developing the science of horizontal drilling.  A new debate over the value of the tax breaks vs the value of the tax revenue should be underway.

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"The 1994 law, passed when horizontal drilling was a relatively new technique, gives a full exemption from severance taxes on all production for two years, or until the well cost is paid, whichever comes first.

Various industry estimates place costs at $5 million to $12 million per well."

http://www.businessweek.com/ap/financialnews/D9LSIAT80.htm

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Permalink Reply by Craig Wascom on January 2, 2012 at 15:57

Copied from Advocate

 

The Advocate’s recent opinion article titled, “Wells a bust for the state,” claims that while the Haynesville Shale is booming, it has been a bust for Louisiana because the state is not getting much tax benefit.

To say the Haynesville Shale has been a bust is a far exaggeration of the truth. The article’s shortsighted focus on severance tax revenue does not pay credence to the larger, macro-level impact the Haynesville has had on our state.

Natural gas extraction operations in the Haynesville generated more than $40 billion in direct and indirect economic growth between 2008-2010.  Over that period, the Haynesville Shale has supported more than 100,000 jobs and provided Louisiana with nearly $1.3 billion in local and state tax revenue. The state receives tax revenue in the form of corporate taxes, sales taxes, ad valorem taxes and personal income taxes.

While Haynesville wells are some of the most expensive wells to drill in the United States, the state’s horizontal severance tax investment incentive has made Louisiana a more attractive place to do business. Additionally, 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. It continues to be the most prolific natural gas producing field in the continental United States. However, the boom status noted within the opinion article is no longer evident in the region, as natural gas prices have dropped significantly and companies are drawing down their rig count in order to exploit more competitive shale plays around the country.

Repealing this incentive certainly would result in an immediate and short-term influx of dollars to the state; however, the greatest threat to future state budgets would be a complete absence of the Haynesville development from the long-term effects of a repeal.  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

Baton Rouge

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Permalink Reply by Krkyoldhag on January 3, 2012 at 5:15

None of this matters if gas prices keep dropping.  Today on the stock market every other stock is going up including oil but gas is still dropping..

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