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Beware of Haynesville Decline, Economist Warns Parishes

Louisiana parishes overlying the Haynesville Shale "are awash in money;" others, not so much, an economist told NGI's Shale Daily. As producers set their sights on more lucrative shale plays -- the Marcellus and Eagle Ford, for instance -- beneficiaries of the North Louisiana shale boom would be wise not to build the shale revenue into their budgets, he said.

DeSoto, Red River, Bossier and Caddo parishes (and to a lesser extent Webster Parish) have enjoyed a significant bump in property tax revenue, nearly all of it coming from the energy-related sectors, said economist Loren Scott of Baton Rouge, LA-based Loren C. Scott & Associates Inc. Sales tax revenue is up, too, but not so much in Webster, which is on the far eastern side of the Haynesville.

In DeSoto, school teacher salaries have been raised by $2,000 this year and by $2,500 last year, thanks to Haynesville tax revenue, according to the Shreveport Times. While he's not arguing against spending on education, Scott said pay increases based on Haynesville revenue make more sense when they're distributed as bonuses or supplements as opposed to increases in salary.

During a recent presentation in North Louisiana, Scott said he "...tried to caution [parish officials]...to primarily use this money for one-time types of expenditures, like improvements in your school buildings, your roads and things like that and to be very careful about building this into your salary structure. I don't know to what extent they're being careful about this," he told NGI's Shale Daily.

There's reason for caution because producer interest has turned away from the Haynesville as acreage is held by production and other plays offer more attractive returns, Scott said. Because the Haynesville is deep (read, expensive to drill) and dry (no higher-priced natural gas liquids to boost revenue), the economist has projected that activity in the Haynesville will be declining through about 2013.

Indeed, according to NGI's Shale Daily Unconventional Rig Count, the Haynesville/Bossier has seen a 34% decline in drilling activity from 191 rigs a year ago to 127 rigs today, while the Marcellus is up 9% (129 to 141 rigs) and the Eagle Ford is up 116% (79 to 171 rigs) over the same period.

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