Haynesville: High production, low revenue?
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Written by Heather Miller
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Monday, February 14, 2011 |
“Fracking” in to north Louisiana’s Haynesville Shale has carried natural gas production levels in Louisiana to their highest in more than 25 years, also lowering electricity bills for Louisianans and giving an upper hand to the state’s chemical plants competing with overseas companies.
The Advocate’s Ted Griggs reported Sunday that the roughly 2 trillion cubic feet of natural gas produced in 2010 is 36 percent more than 2009 production and 48 percent more than what the state generated in 2008.
The colossal underground rock brought a “gold rush” mentality to the state when drilling there began, according to the state Department of Natural Resources, and has since cut the price of natural gas in half:
That’s good news for the Louisiana’s chemical plants and their competitive advantage and for residents’ lower electric and natural gas bills. The price even opens the door to exporting liquefied natural gas from Louisiana.
Economist Loren Scott told The Advocate that a key factor in electricity bills is the fuel adjustment charge, which fluctuates depending on natural gas and other fuel prices:
In 2008, the cost for 1,000 kilowatt hours of electricity — a typical customer’s monthly usage — was $110 to $120, said Bill Mohl, president and chief executive officer of Entergy Gulf States Louisiana LLC.
The bill for the same amount of electricity today is $80 to $90 — with the natural gas prices having fallen closer to $4 per thousand cubic feet.
The latest report of Haynesville’s success comes on the heels of an article outlining a lack of severance tax revenue hitting the state’s coffers from the shale. The Advocate reported Feb. 5 that Haynesville wells are exempted from severance taxes for up to two years, and production at the site is expected to plummet long before companies will begin paying severance taxes. Figures from the state’s Legislative Fiscal Office caused an outcry from oil and gas industry leaders, who countered that the tax exemption was a major component of the influx of companies drilling.
Read the full natural gas production report here.
Read more on the Haynesville Shale and the severance tax exemption here and a response from a Lafayette oil and gas manager.
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When you tax something you almost always get less of it.