But it can't be all bad, right? Everybody knows this state's fortunes have been tied to the boom and bust cycle of the oil industry for over a century. Surely, by now, we would have perfected the art of riding the wave.
When times are flush for oil production, so they are for state revenues. During the boom, all we have to do is collect our tax windfall, and put it to work benefiting the people of the state; building infrastructure, funding schools and hospitals, and, of course responsibly socking some away for when the inevitable bust comes along. That's what we did this time around, right?
This year, a legislative audit found that from 1994 to 2007, just 393 horizontal wells were put into production and approved for the tax credit. But over the next seven years, as the once-exotic technology grew commonplace and Louisiana’s Haynesville Shale gas field began producing, the number jumped about sevenfold, with a total of 2,797 horizontal wells approved for the credit.Oh well. We'll get 'em next time.
Under the credit’s rules, energy producers are refunded the severance taxes on horizontal oil or gas wells for the first two years of production or until the well has paid for itself, whichever comes first. On average, drilling a horizontal well costs about $9 million.
The legislative audit noted that no other state with significant horizontal-drilling operations offered a full refund of so-called severance taxes — though some offer reduced rates.
As the use of the break exploded, so, too, did the state’s cost — from $3 million in 2005 to a high of $272 million in 2012. It cost $166 million in 2014 as drilling slowed, the report said.