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Natural Gas

DeSoto Parish, Louisiana

For years, natural gas production in the Haynesville Shale in the southern U.S. was too difficult and costly. However, in the mid- to late-2000s, advances in hydraulic fracturing and horizontal drilling techniques, as well as rising natural gas prices, made extracting natural gas in the region both technically feasible and profitable for the extractive industries.

Geology and history

The Haynesville sedimentary rock formation rests 10,000 feet to 13,000 feet below the surface of northwestern Louisiana, eastern Texas, and southwestern Arkansas. DeSoto Parish, home to approximately 27,000 people, sits at the center of the Haynesville Shale.1 In the early 2000s, DeSoto Parish’s economy consisted primarily of cattle and dairy farming, and forest extraction. However, DeSoto’s economy transformed when the Chesapeake Energy Corporation drilled the first exploratory well in the Haynesville Shale in 2007, setting off a natural gas boom in the parish in 2008.2

Production

From 2007 to 2011, natural gas production quadrupled in northern Louisiana, where DeSoto Parish is located.3 More recently, declining natural gas prices have resulted in lower production numbers. For example, the spot price at the Henry Hub in Louisiana fell by about 35% from 2014 to 2015 (from an average $4.55 per MMBtu to an average of $3 per MMBtu in 2015).4 Production in the region fell from 2.8 trillion cubic feet in 2011 to 1.87 trillion cubic feet in 2014.5

In 2014, Louisiana had a total of 23.25 trillion cubic feet of proved natural gas reserves.6 Louisiana experienced the largest drop in natural gas production in the country in 2014, with a decline of 16%.7

In 2014, the U.S. Energy Information Administration estimated that there were 16.6 trillion cubic feet of proved reserves in the Haneysville/Bossier Shale in Texas and Louisiana.8 Louisiana ranked fifth in the nation for proved shale gas reserves.9

Natural gas production in northern Louisiana10

Chart shows natural gas production in northern Louisiana from 2005 to 2014 as a line graph. The y-axis represents thousands of cubic feet of natural gas, and tops out at 3 trillion cubic feet. From 2005 to 2009, annual natural gas production rose from about 1.2 to 1.4 trillion cubic feet, then rose to levels of over 2.8 trillion in 2011 and 2012. Since 2012, production declined to its 2014 level of under 1.9 trillion.

Employment

Employment data for the complete oil and gas industry in DeSoto Parish is unavailable.11 The data that does exist shows that 271 people, about 1% of DeSoto’s 27,000 residents, work in support activities for oil and gas extraction.12 That figure does not include those working directly in oil and gas extraction itself. Data also exists for employment in the broader extractive industries — which includes oil and gas extraction, but also mining and quarrying. The chart below shows the increase in employment in the broader extractive industries in DeSoto Parish between 2005 and 2014.13

Wage and salary employment in DeSoto Parish: Extractive industries vs. all other industries14

Chart shows the number of jobs in DeSoto Parish from 2005 to 2014. The y-axis, which represents the number of wage and salary employees, tops out at 7,000, and each bar compares the number of extractive industry jobs to the total number of jobs that year. Each bar also identifies the percentage of jobs in the extractive industries. The total number of jobs each year ranges from about 4,100 to a little under 6,000. The percentage of jobs in the extractive industries is between 4% (in 2005) and 21% (in 2012). In both 2013 and 2014, there were about 1,000 jobs in the extractive industries, which represented 18% of DeSoto Parish jobs.

Revenue

The Haynesville Shale natural gas boom has increased revenue for the State of Louisiana and DeSoto Parish through state severance taxes and royalties, parish property taxes, and sales and use taxes.

The state of Louisiana levies a severance tax on natural gas owners at a rate of $0.158 per Mcf produced.15 In 2015, Louisiana received $190 million from gas severance taxes across the state, up from $99.45 million in 2013.16 It also received $85 million from gas royalties for production on state-owned lands and water bottoms, down from $159 million in 2013.17 The state distributes some of this revenue to the parishes where extraction took place. For severance taxes, one-fifth of taxes return to the parish, as long as the total does not exceed $750,000.18 For royalties, 10% return to the parish.19 Royalties are bid on for each lease, and by law they cannot be less than 1/8 of the value of production.20 In 2014, DeSoto Parish received $624,592 in royalties, rents, and bonuses — which accounted for 2% of DeSoto Parish’s total revenue. (Taxes made up 69% of parish revenue.)21 Louisiana also collects 1% of gross receipts from the operation of natural gas franchises or charters in the state.22

In addition to the state, DeSoto Parish also collects revenue from natural gas production, most notably in the form of property taxes. Revenue from property taxes increases with the assessed value of the property, and is the largest source of revenue for DeSoto Parish. According to the parish school board, the discovery of shale gas increased property values in Desoto Parish starting in 2008. From FY 2009 to FY 2015, the taxable value of property within the parish increased by 160%, or from $292 million to $750 million.23 24 25 In 2015, property taxes exceeded $43 million.26 Property tax revenues are used for numerous purposes, including to pay off long-term debt which was sold to build new schools.27

Sales and use taxes are the second largest source of revenue for DeSoto Parish. Natural gas exploration and development spurred greater revenue from sales and use taxes, which increased from $8 million in FY 2005 to $73 million in FY 2011. This trend has since reversed, and sales and use tax accounted for $23 million in revenue in FY 2014.28

Sales and use taxes are deposited into the General Fund, School Lunch Fund, Debt Service Fund, and Capital Projects Fund.29 While sales and use taxes are not solely attributable to the natural gas industry, there is a noticeable decline in this revenue stream when the industry faces slowdowns. For example, sales and use taxes declined by $27 million (40%) in 2013 compared to the prior fiscal year, as exploration for oil and natural gas moved to other parts of the country.30

Sales and use taxes 31

Chart shows sales and use tax trends in DeSoto Parish as a bar graph. The y-axis represents millions of dollars and tops out at $80 million. Sales and use taxes in the parish range from under $10 million in 2005 to over $70 million in 2011. In 2012, tax revenue dropped to under $50 million, then just over $20 million in 2013 and 2014.

Property taxes also contribute substantially to the school board’s revenue, funding employee salaries, operations, and debt service payments on capital bonds for the local education system.32 The amount of revenue from property taxes increased by 45% from 2012 ($26.5 million) to 2015 ($38.4 million).33 State tax documents do not specify what percentage of property taxes comes from the gas industry.

Costs

Since 2008, Louisiana has invested at least $1.1 billion in transportation projects in the seven parishes located in the northwest region of the state, including DeSoto Parish.34 While Louisiana’s latest comprehensive state transportation plan acknowledges that the state must pay adequate attention to the transportation needs of the rapidly expanding oil and gas industry, it does not specify the types or costs of projects supported.35

Louisiana completed a Hydraulic Fracturing State Review (PDF) in March 2011, which explains the state’s policies around industrial water use and wastewater reuse and disposal. However, the review does not itemize public expenditures on water-related infrastructure for industrial activities.36

The DeSoto Parish Emergency Medical Services (EMS) Department formed in 2001, funded by a 4% millage tax.37 Since then, the DeSoto EMS Department has worked closely with gas companies on safety measures, including answering numerous calls related to gas-well site incidents. The parish is not bearing the full burden of these incidents; the parish has received donations from private companies to offset equipment costs. The frequency and value of the donations is not published.

Data availability

The table below highlights data sources used to compile this narrative, as well as any gaps in publicly available data.

This case study is current as of August 2016. Many data sources are updated regularly, and may show more recent figures than are included here.

Measure Data availability Data gaps
Production The Louisiana Department of Natural Resources (DNR) publishes annual natural gas production data at the regional level.
Employment The Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages published employment data for extractive industries support activities for 2013. U.S. Census Bureau Censtats data on County Business Patterns provided historical employment data for the complete mining industry (NAICS code: 21) for the parish. For any employment estimates identified using the letter-coded ranges (e.g., “a” = 0–19 employees), the average number was used (e.g., “a” = 9.5 employees). BLS data does not include employment in the oil and gas industry more broadly, only in support activities. For DeSoto Parish, Censtats did not have employment data specifically for the oil and gas industry (NAICS codes: 211, 213111, 213112), only for the mining industry at large (NAICS code: 21). In addition, the data did not separate employment related to natural gas extraction from the broader oil and gas sector.
Revenue The Louisiana Department of Revenue, Louisiana DNR, Louisiana Division of Administration, DeSoto Parish Policy Jury, and DeSoto Parish School Board publish information on revenue related to extractive industries.
Costs The Louisiana Department of Transportation and Development, Louisiana DNR, and DeSoto Parish website publish publicly available cost information related to natural gas extraction. Data on public expenditures for gas-related site reclamation was not found. Data on private company donations to parish emergency services was not publically available. Several public reports on parish costs including Department of Transportation reports have not been updated since last year.

Notes

  1. U.S. Census Bureau, County Population, 2014, DeSoto Parish

  2. DeSoto parish’s instant millionaires hold on to their humble roots, 2011

  3. Louisiana Department of Natural Resources, Louisiana Energy Facts and Figures

  4. Energy Information Administration, U.S. Crude Oil and Natural Gas Proved Reserves (PDF), 2014

  5. Louisiana Department of Natural Resources, Louisiana Energy Facts and Figures

  6. Energy Information Administration, U.S. Crude Oil and Natural Gas Proved Reserves (PDF), 2014, p. 33

  7. Ibid., p. 15

  8. Ibid., p. 17

  9. Ibid., p. 16

  10. Louisiana Department of Natural Resources, Louisiana Energy Facts and Figures

  11. Data for those employed in oil and gas extraction (NAICS 211) is not publicly available

  12. Bureau of Labor Statistics, Quarterly Census of Employment and Wages: 2013 Annual Averages

  13. 2013 County Business Patterns for NAICS code 21 in DeSoto Parish, 2005–2014

  14. Ibid.

  15. Louisiana Department of Revenue, Severance Taxes: Gas

  16. Louisiana Department of Natural Resources, Lousiana Energy Facts and Figures, Revenue, Mineral Severance Tax

  17. Louisiana Department of Natural Resources, Lousiana Energy Facts and Figures, Revenue, Mineral Royalty Revenue

  18. The Louisiana Division of Administration, Program 22-917, Severance Tax Dedication (PDF)

  19. The Louisiana Division of Administration, Program 22-918, Parish Royalty Fund (PDF)

  20. State of Louisiana Comprehensive Annual Financial Report (PDF), 2015, p. 165

  21. DeSoto Parish Policy Jury, Annual Financial Report (PDF), 2014

  22. State of Louisiana Comprehensive Annual Financial Report (PDF), 2015, p. 165

  23. The DeSoto Parish fiscal year starts on July 1 and ends on June 30 the following year.

  24. Annual Operating Budget of the DeSoto Parish School Board (PDF), July 1, 2014 through June 30, 2015, p. 82

  25. Annual Operating Budget of the DeSoto Parish School Board (PDF), July 1, 2015 through June 30, 2016, p. 28

  26. Ibid.

  27. Ibid.

  28. Ibid.

  29. DeSoto Parish Policy Jury, Annual Financial Report (PDF), 2014

  30. Annual Operating Budget of the DeSoto Parish School Board (PDF), July 1, 2012 through June 30, 2013

  31. Ibid.

  32. Ibid.

  33. Annual Operating Budget of the DeSoto Parish School Board (PDF), July 1, 2012 through June 30, 2013; Annual Operating Budget of the DeSoto Parish School Board (PDF), July 1, 2014 through June 30, 2015

  34. Louisiana Department of Transportation and Development, Accomplishments 2008–2014 (SWF), p. 18

  35. Louisiana Statewide Transportation Plan, Chapter 7: Transportation Plan Development (PDF), 2003, p. 7-50

  36. Louisiana Department of Natural Resources, Louisiana Hydraulic Fracturing State Review (PDF), 2011, p. 16

  37. DeSoto Parish EMS, Our History