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« Typing on teevee | Main | Thanks, Virginia »

May 16, 2012


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Chesapeake had been in the news cause their debt is so high and Nat Gos prices are so low.

Furthermore rigs in the field are being closed down.


From a 30 year oil industry veteran Rockman


"The resulting road damage will cost tens of millions of dollars to fix and is catching officials from Pennsylvania to Texas off guard.'' I don't like being harsh with my Yankee cousins but: Please stop whining. First off, there has been nothing about frac'ng that has caught "Texas off guard". Frac trucks have been a common sight running down our roads for over 50 years. We have weight restrictions but that certainly doesn't mean those loads don't add to the wear. But we also charge permit fees to roll heavy trucks and, additionally, the state and counties have collected many $BILLIONS from the oil patch through severance taxes. And if I drill in a municipal area, as I did a year ago near Beaumont, I had to get a permit from that little city AND put up a $250,000 bond to cover any potential damage I might do to their roads. Fortunately, I didn't damage the roads and got my bond back. And the city will get their share of the severance tax from the well as will the state.

The citizens of Texas have never subsidized the oil patch. In fact, they've gained greatly from the process. And I'm not just talking about the jobs. When Texas was booming the severance tax and royalty income to the state paid for 100% of our university system. My tuition FOR GRADUATE SCHOOL cost less than $400 for the year. Unfortunately, PO caught up with Texas as it will with every producing region and that income has fallen. But it's still significant. OTOH Pennsylvania has never charged a severance tax on oil/NG production. I suspect they have college students going into tens of thousands of $'s of debt to state schools there now. I estimate that if PA had charged the same severance tax just for NG as Texas does today they would have collected almost $400 million just during 2011. And $billions in the future. $billions would do a lot of road repairs...and then some. I'll never understand how the PA citizens allow their politicians to give the oil patch such a huge financial break. Texas has one of the friendliest political system for the oil patch and if any politician here suggested not charging us severance tax they would literally be tarred and feathered. LOL.

I don't enjoy paying severance taxes, road fees, putting up bonds or spending many $millions to properly dispose of nasty fluids. But it doesn't bother me either...just the cost of doing business. And none of those costs have ever stopped me from drilling a well. I've explained this all many time to various Yankee cousins. I've sent letters to the editors of different publications in PA and NY. So far I haven't seen a single word about fixing this problem...just more endless whining. I give up. If they won't push their politicians to make changes then they deserve exactly what they get IMHO.


For what it's worth, from Rockman:

“Tom Poorman, president of the Zanesville-Muskingum Chamber of Commerce, said the shale oil and gas industry in eastern and southern Ohio is too young to risk with higher taxes.... Taxes now could be as low as 20 cents a barrel for oil.”

On some perverse level I hope Tom was just bought off by the local oil patch and that a person in his position just isn’t that ignorant. In the very hot Eagle Ford Shale trend in Texas the severance tax on oil is 4.6%. And that’s a bargain compared to Louisiana where severance tax is 12.5% on oil. Additionally counties/parishes in both states collect production taxes of a few percent.

So the Ohio citizens may collect $0.20 per $100 bbl of oil while the citizens of Texas collect $4.60 per bbl and in Louisiana $12.50 per bbl. IOW Louisiana operators will be paying over 60X more severance tax per bbl of oil than operators in Ohio. Makes you wonder why Devon and other companies are spending tens of $millions trying to turn the new Marine Tuscaloosa Shale play north of New Orleans into the next Eagle Ford exploration model.

If my Yankee cousins buy this BS they deserve to get screwed by their politicians and the oil patch IMHO.

Bill Bush

Wish I had found this earlier. It is a god read on how much protection we can expect when there are dollars to protect.

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