Blog Post

Haynesville Governments Retain Fiscal Benefits in the Wake of a Boom

Dec 27, 2013 | Daniel Raimi

The Haynesville Shale, which straddles northwestern Louisiana and northeastern Texas, is one of the most prolific “dry gas” plays in the United States, meaning that it produces natural gas without large quantities of oil or natural gas liquids such as ethane, propane, and butane. In the late 2000s, when dry gas prices were high, land in the Haynesville was some of the most sought-after acreage in the nation, with some land leasing for more than $20,000 per acre.

Well completions in Bossier, Caddo and De Soto parishes of Louisiana.

As a result, the Haynesville-rich Louisiana parishes of Bossier, Caddo and De Soto saw a sharp spike in drilling activity from 2006 through 2008. However, a steep decline in dry gas prices in 2009 drove most operators out of the Haynesville and into regions with more substantial liquids production.

A key question for oil- and gas-producing regions is how these communities fare after a drilling boom fades. When it comes to local government finances, the results of Haynesville development have generally been positive. Even though drilling activity and associated economic activity has plummeted since the peak years of 2006-2008, the fiscal health of local governments has been greatly enhanced.

De Soto Parish revenues.

In De Soto Parish, a rural region with relatively lower income levels than Bossier and Caddo, new revenues have more than offset the increased costs associated with maintaining and repairing parish-owned roads affected by heavy trucking.

The largest single source of revenue for De Soto Parish was a $28.7 million signing bonus it received in 2008 for leasing roughly 1,000 acres of land for natural gas production. In addition, revenues from sales taxes grew by more than 500 percent and have since leveled out to roughly 20 percent higher than their pre-boom levels. Similarly, property tax revenues more than doubled and remain near historic highs.

Louisiana state law limits parish receipts from the statewide severance tax at roughly $1 million per year, but these other revenues have allowed De Soto, along with Bossier and Caddo parishes, to manage new costs. What’s more, these parishes have used increases in revenue to upgrade their roads and bridges, and in some cases expand other services for residents such as building community centers and upgrading fire and rescue equipment.

A wastewater disposal well in Panola County, Texas.

Across the border in Panola County, Texas, revenues have grown less dramatically, largely due to the fact that any increase in property tax revenues greater than 8 percent is subject to “rollback” from county voters (for more on “rollback,” see our previous blog post). While expenditures for road maintenance also increased in Panola County, the local officials I spoke with described the overall impact as a large net positive for county finances.

Although neither Louisiana nor Texas allocate large amounts of revenue from severance taxes to their local governments, the cities and counties I visited in the Haynesville shale have seen benefits linger after the boom peaks and fades.

This research was carried out at the Duke University Energy Initiative with support from the Alfred P. Sloan Foundation.