Digging deep for an impact

02 01, 2012 by Bastrop Enterprise

Oil exploration's economic benefits remain in the future

Although the local economic gains may not be direct or immediate, three permitted oil wells and a flurry of mineral leasing activity in Morehouse Parish give cause for optimism.

“We don’t really know yet [what the impact will be],” said Morehouse Tax Assessor John Hill. “We’re hoping this oil exploration will really kick off in the next few years.”

Last fall, the Louisiana Department of Natural Resources announced the development of a new shale play (petroleum-bearing formation) called the Brown Dense, believed to span beneath Morehouse and other northeastern parishes.

Devon Energy of Oklahoma City began drilling the first well in Morehouse Parish in three years last September, followed by ExxonMobil subsidiary XTO Energy, which began drilling in November. A third well permitted to Dan A. Hughes Co. LP of Texas has yet to begin drilling in the parish.

Hill said the companies’ physical equipment used in Morehouse Parish was assessable on Jan.1, while the wells themselves can be assessed based on their vertical depth. Devon’s equipment was assessable because it was still in use at the well site on Jan. 1, while the ExxonMobil equipment had been removed and the well had been capped by the first of the year. The assessable value of Devon’s equipment will not be known until the company has returned their reports to Hill’s office by the deadline in April.

“We calculated about $9,000 in taxes [the Devon well] would have generated last year, not including the equipment,” he said.

Hill said productive wells could benefit the parish economy through the collection of severance taxes, which are levied on all natural resources in Louisiana. According to the LDNR, oil and gas extraction accounts for nearly 92 percent of severance tax collections in the state.

Energy companies have filed mineral leases on more than 36,000 acres in rural Morehouse Parish. Hill said the leases do not have a direct impact on agricultural and timber property values for assessment purposes, for two reasons. First, the mineral rights are often retained by someone other than the current property owner.

“[The oil companies] are talking to whoever owns the mineral rights, not the property owner per se,” he said.

Second, the state assesses “use value” rather than fair market value for agricultural and timber properties. The use value is determined by the land’s productivity and, in the case of farmland, the soil content.

“The state will adjust their [land use] values every four years, but it doesn’t fluctuate very much,” said Hill.

Regardless of mineral leases, he said rural property values have shown some increase because local growers have had “a couple of good years” in terms of productivity. He does not expect real estate values in general to change very much this year.

“It’s going to take a lot of wells to really help the parish with property taxes,” said Hill. “I’ve heard bits and pieces [of plans for more wells], but it’s just hearsay right now.”

Hill said the recent decline in activity in Haynesville Shale play in northwest Louisiana - a result of low natural gas prices -- could lead to increased activity in the new oil play in Morehouse.

“That might help us right now,” he said. “If oil and gas exploration keeps up, and if companies will come in and set up shop here instead of somewhere else like Monroe, it will really help the economy.”

The Brown Dense activity is not limited to Morehouse Parish. According to the LDNR, the mineral rights for more than 6,000 acres of state-owned land have been leased in East Carroll Parish, and private interests have nominated for bid an additional 3,000-acre area spanning portions of East Carroll, West Carroll and Richland parishes.

In a recent press release, LDNR Secretary Scott Angelle also expressed optimism about the economic benefits of the Brown Dense play for northeast Louisiana.

“When the Haynesville Shale boom came to northwest Louisiana, it made an incredible positive economic impact in an area that already had a strong economy,” said Angelle.

“Responsible exploration of this new prospect, even if it does not reach the same fever pitch, could mean a welcome strengthening of the northeast Louisiana economy and greater opportunities for businesses and jobs.”