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 6% from 2015 to 2016 (from an average $2.62 per MMBtu to an average of $2.46 per MMBtu in 2016).⁴ Production in the region fell from 2.9 trillion cubic feet in 2012 to 1.67 trillion cubic feet in 2016.⁵

In 2015, Louisiana had a total of 16 trillion cubic feet of proved natural gas reserves.⁶ Louisiana experienced the largest drop in natural gas production in the country in 2015, with a decline of 8%.⁷

In 2015, the U.S. Energy Information Administration estimated that there were 12.8 trillion cubic feet of proved reserves in the Haneysville/Bossier Shale in Texas and Louisiana.⁸ Louisiana ranked sixth in the nation for proved shale gas reserves.⁹

Natural gas production in northern Louisiana¹⁰

Employment

Employment data for the complete oil and gas industry in DeSoto Parish is unavailable.¹¹ The data that does exist shows that 304 people, about 1% of DeSoto’s 26,965 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 2006 and 2015.¹³

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

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 $0.111 per Mcf produced.¹⁵ In 2015, Louisiana received $190 million from gas severance taxes across the state, up from $148 million in 2014.¹⁶ Through the end of November 2016, however, the state had only received $119 million.¹⁶ It also received $61.8 million from gas royalties for production on state-owned lands and water bottoms in 2016, down from $85.6 million in 2015 and $166.8 million in 2014.¹⁷ 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, for example, 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 fiscal year 2009 to 2015, the taxable value of property within the parish increased by 160%, or from $292 million to $750 million.^{23 24 25} However, information from the DeSoto Parish Tax Assessor shows parishwide taxable property values decreased in fiscal year 2016 to approximately $687 million, ²⁶ In 2016, property taxes exceeded $40 million.²⁷ Property tax revenues are used for numerous purposes, including to pay off long-term debt which was sold to build new schools.²⁸

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 fiscal year 2005 to $73 million in fiscal year 2011. This trend has since reversed, and sales and use tax accounted for $18 million in revenue in fiscal year 2015.²⁹

Sales and use taxes are deposited into the General Fund, School Lunch Fund, Debt Service Fund, and Capital Projects Fund.³⁰ 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.³¹

Sales and use taxes ³²

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.³³ The amount of revenue from property taxes increased by 52% from 2012 ($26.5 million) to 2016 ($40.2 million).³⁴ 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.³³ 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 July 2017. Many data sources are updated regularly, and may show more recent figures than are included here.

Notes