IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v40y2012i1p410-427.html
   My bibliography  Save this article

Modeling the horizontal well severance tax exemption in Louisiana

Author

Listed:
  • Kaiser, Mark J.

Abstract

The Haynesville shale is an unconventional resource play in Louisiana that requires significant capital expenditures to develop. To produce at commercial rates, shale gas wells are drilled horizontally and fractured to release their gas, and since 1994, a severance tax exemption on horizontal wells has been in effect, offering an incentive to investors to promote industry activity. In 2011, the Haynesville shale contributed 60% to the state’s gas production, and the impact of the horizontal severance tax exemption on revenue collection has been significant. The purpose of this paper is to model the horizontal well severance tax exemption for Haynesville shale gas wells to quantify its impact and the manner in which severance tax revenues are split between the operator and government. We develop an analytic framework to value the tax exemption under prevailing production, cost, and price scenarios. We estimate that the 2011 inventory of Haynesville wells will generate between $1.2 to $1.5 billion in severance tax revenue throughout their lifetime with at least 64% accruing to the private sector. A discussion of policy issues and trade-offs in Louisiana’s horizontal severance tax exemption and implementation is provided.

Suggested Citation

  • Kaiser, Mark J., 2012. "Modeling the horizontal well severance tax exemption in Louisiana," Energy, Elsevier, vol. 40(1), pages 410-427.
    • Handle: RePEc:eee:energy:v:40:y:2012:i:1:p:410-427
    DOI: 10.1016/j.energy.2012.01.036
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544212000412
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2012.01.036?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kaiser, Mark J., 2010. "Economic limit of field production in Louisiana," Energy, Elsevier, vol. 35(8), pages 3399-3416.
    2. Kaiser, Mark J. & Yu, Yunke, 2010. "Economic limit of field production in Texas," Applied Energy, Elsevier, vol. 87(10), pages 3235-3254, October.
    3. Kunce, Mitch, 2003. "Effectiveness of Severance Tax Incentives in the U.S. Oil Industry," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(5), pages 565-587, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Newell, Richard G. & Raimi, Daniel, 2018. "The fiscal impacts of increased U.S. oil and gas development on local governments," Energy Policy, Elsevier, vol. 117(C), pages 14-24.
    2. Gülen, Gürcan & Browning, John & Ikonnikova, Svetlana & Tinker, Scott W., 2013. "Well economics across ten tiers in low and high Btu (British thermal unit) areas, Barnett Shale, Texas," Energy, Elsevier, vol. 60(C), pages 302-315.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ewing, Bradley T. & Thompson, Mark A., 2016. "The role of reserves and production in the market capitalization of oil and gas companies," Energy Policy, Elsevier, vol. 98(C), pages 576-581.
    2. Apergis, Nicholas & Ewing, Bradley T. & Payne, James E., 2021. "The asymmetric relationship of oil prices and production on drilling rig trajectory," Resources Policy, Elsevier, vol. 71(C).
    3. Zhao, Xu & Luo, Dongkun & Xia, Liangyu, 2012. "Modelling optimal production rate with contract effects for international oil development projects," Energy, Elsevier, vol. 45(1), pages 662-668.
    4. Apergis, Nicholas & Ewing, Bradley T. & Payne, James E., 2016. "A time series analysis of oil production, rig count and crude oil price: Evidence from six U.S. oil producing regions," Energy, Elsevier, vol. 97(C), pages 339-349.
    5. Ewing, Bradley T. & Malik, Farooq, 2017. "Modelling asymmetric volatility in oil prices under structural breaks," Energy Economics, Elsevier, vol. 63(C), pages 227-233.
    6. Yuan, Jiehui & Luo, Dongkun & Feng, Lianyong, 2015. "A review of the technical and economic evaluation techniques for shale gas development," Applied Energy, Elsevier, vol. 148(C), pages 49-65.
    7. Kaiser, Mark J., 2012. "Profitability assessment of Haynesville shale gas wells," Energy, Elsevier, vol. 38(1), pages 315-330.
    8. Kaiser, Mark J., 2011. "Economic limit of Outer Continental Shelf Gulf of Mexico structure production," Applied Energy, Elsevier, vol. 88(7), pages 2490-2508, July.
    9. Keqiang Guo & Baosheng Zhang & Kjell Aleklett & Mikael Höök, 2016. "Production Patterns of Eagle Ford Shale Gas: Decline Curve Analysis Using 1084 Wells," Sustainability, MDPI, vol. 8(10), pages 1-13, September.
    10. Pastor, Daniel J. & Ewing, Bradley T., 2022. "Exploding DUCs? Identifying periods of mild explosivity in the time series behavior of drilled but uncompleted wells," Energy, Elsevier, vol. 254(PB).
    11. Katie Jo Black & Shawn J. McCoy & Jeremy G. Weber, 2018. "When Externalities Are Taxed: The Effects and Incidence of Pennsylvania’s Impact Fee on Shale Gas Wells," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 107-153.
    12. Hoy, Kyle A. & Wrenn, Douglas H., 2018. "Unconventional energy, taxation, and interstate welfare: An analysis of Pennsylvania's severance tax policy," Energy Economics, Elsevier, vol. 73(C), pages 53-65.
    13. Sun, Xiaohua & Ren, Junlin & Wang, Yun, 2022. "The impact of resource taxation on resource curse: Evidence from Chinese resource tax policy," Resources Policy, Elsevier, vol. 78(C).
    14. Weber, Jeremy G. & Wang, Yongsheng & Chomas, Maxwell, 2016. "A quantitative description of state-level taxation of oil and gas production in the continental U.S," Energy Policy, Elsevier, vol. 96(C), pages 289-301.
    15. Leighty, Wayne & Lin, C.-Y. Cynthia, 2012. "Tax policy can change the production path: A model of optimal oil extraction in Alaska," Energy Policy, Elsevier, vol. 41(C), pages 759-774.
    16. Kaiser, Mark J. & Yu, Yunke, 2010. "Economic limit of field production in Texas," Applied Energy, Elsevier, vol. 87(10), pages 3235-3254, October.
    17. Olmstead, Sheila & Richardson, Nathan, 2014. "Managing the Risks of Shale Gas Development Using Innovative Legal and Regulatory Approaches," RFF Working Paper Series dp-14-15, Resources for the Future.
    18. Brown, Jason P. & Maniloff, Peter & Manning, Dale T., 2020. "Spatially variable taxation and resource extraction: The impact of state oil taxes on drilling in the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    19. Hoy, Kyle A., 2023. "Asymmetric responses to severance tax changes: Coal production in West Virginia," Energy Economics, Elsevier, vol. 125(C).
    20. Calvo, Jorge Andrés Perdomo & Pérez, Ana María Jaramillo, 2016. "Optimal extraction policy when the environmental and social costs of the opencast coal mining activity are internalized: Mining District of the Department of El Cesar (Colombia) case study," Energy Economics, Elsevier, vol. 59(C), pages 159-166.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:40:y:2012:i:1:p:410-427. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.