Acadiana Business

Spotlight on energy tax breaks Friday

by Leslie Turk

Industry claims state would lose more by repeal because energy companies will choose to drill elsewhere.

The Revenue Study Commission, charged with reviewing the effectiveness of Louisiana s many tax breaks, turns its attention on Friday to sales tax exemptions related to energy, which make up roughly half of the 44 sales tax expenditures up for review.

Oilfield operators, natural gas suppliers and rig owners will be listening for what lawmakers have to say about a handful of tax breaks that affect their livelihoods. "We'll be there to answer questions and provide a statement," says Don Briggs, president of the Louisiana Oil and Gas Association. "But I'm not expecting the commission to get into too much detail."

Noticeably absent from the list - for now, as Briggs expects it to be discussed eventually - is horizontally drilled wells, which can escape severance taxes for up to two years as part of Louisiana's investment incentive program.

During the spring of last year, officials from the Legislative Fiscal Office told lawmakers they might want to take a closer look at altering the incentive. By December, reports showed that severance tax collections were down some $128 million.

According to the Department of Revenue's tax exemption budget for the most recently completed fiscal year, the horizontal well incentive is projected to cost the state $254 million next year from natural gas suspensions.

Briggs and others argue that any kind of repeal would be shortsighted because all related investments - jobs, contracting with service companies, local taxes and more - would be forfeited as well if companies decide to drill elsewhere.

The exemption, which was created in 1992 in part to help Louisiana compete with Texas , helped encourage investment in the Haynesville Shale area and went largely ignored during times of high gas prices.

But times have changed. As for a compromise, like a trigger that would lift the incentive when prices are high, Briggs says he doesn't see the necessity. "Gas prices are low and they're going to be low for a while," he adds. "To get to the point that gas prices would be so high we wouldn't need the incentive is several years away."