The Advocate’s recent opinion article entitled, “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 that 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 that the Haynesville has had on our state.
Natural gas extraction operations in the Haynesville generated over $40 billion in direct and indirect economic growth between 2008-2010. Over that time period, the Haynesville Shale has supported over 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 U.S., 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 U.S. However, the boom status noted within the opinion piece 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 would certainly 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.
& Gas Association