Low natural gas prices, drilling cutbacks hurt local economies

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March 16, 2012

(Wall Street Journal; March 14) - The 2008 discovery of the Haynesville Shale in DeSoto Parish, La., has been a windfall for local governments. Extra tax dollars paid for three football fields, at nearly $2 million apiece, as well as road and water projects. For the past two years, the school district has doled out annual bonuses to its 750 employees of $8,500 each, a notable sum in a parish where the median household income was $36,890 in 2010, according to U.S. Census figures.

But in recent months, the hotels and RV parks that were built to accommodate energy workers have sat half-empty. Restaurants have seen their sales collapse. Local landowners have seen their royalty checks from drilling companies fall by half in some cases. The foundation of this wealth has started to crumble. The price of natural gas has plunged to a 10-year low, prompting a flight of energy companies.

The number of drilling rigs in the parish dwindled to 24 last week from 54 a year ago, according to oil field services company Baker Hughes. As the drillers depart, so does the spending they lavished on the community. Since September, the school district has collected less in sales taxes than it did in the prior year, down as sharply as 28% in December from the same month a year ago. "We're expecting it to continue decreasing. We just don't know when it's going to level off," said School Superintendent Walter Lee.

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