MS Energy Institute Calls on MS Legislature to Capitalize on Shale Opportunities

MS Energy Institute Calls on MS Legislature to Capitalize on Shale Opportunities

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In the past few years, technology development in oil and natural gas exploration has enabled dramatic increases in U.S. energy production, and rapid growth in energy production has been one of the few bright spots for our country during and since the recession. Energy producing companies have invested billions and created thousands of jobs in states where “tight” geologic formations holding either oil or natural gas are known to exist. Technology has allowed the energy industry to extract this abundantly available energy through horizontal drilling and hydraulic fracturing. Because of this recent development, the U.S. now claims the title as the most energy rich country in the world, taking into account all energy resources.

Recent private investment and exploration activity in the Tuscaloosa Marine Shale formation, which extends into southwest Mississippi, has put several Mississippi counties in play for investment capital related to oil production using horizontal drilling. With limited capital and a number of formations with activity in North America, Mississippi policymakers should consider sending a clear welcome message to those looking to allocate capital in exploration and production. Local economies in other producing areas around the country have been significantly boosted with energy related and induced jobs and revenue. Resource development and extraction jobs, on average, pay twice the average private sector job wages, so these are exactly the kind of jobs we want to add in Mississippi.

As part of our mission, the Mississippi Energy Institute develops policy to support an expanding energy portfolio that  takes advantage of market opportunities to ensure Mississippi’s competitiveness. Our Board of Directors has unanimously agreed on the following statement of support:

             

            The Mississippi Energy Institute recognizes technology breakthroughs in shale oil and natural gas development have provided economic boosts to some areas of the U.S. and, overall, have had a significant positive impact on U.S. energy production. The presence of the Tuscaloosa Marine Shale in southwest Mississippi provides the opportunity for the state to attract capital investment and jobs related to oil exploration and production. However, technical challenges in the TMS are significant, as these wells are some of the most challenging to drill in terms of economics and geology in North America. To date, well economics remain difficult and far less competitive than other regions currently enjoying the benefits of increased domestic shale gas and oil production. Mississippi should consider implementing some relative level of tax parity with other producing states. Therefore, the Mississippi Energy Institute supports legislation to provide the appropriate incentive, through a temporary severance tax reduction to 1.25% for a period of 30 months, to attract private capital for horizontal drilling to address the technical challenges and achieve production profitability in Mississippi tight formations.

             

In this race for capital and jobs in U.S. oil production, other producing states have lowered, and in some instances fully exempted, energy severance taxes for periods of time to encourage investment. In an economy where business and investors seem extremely cautious and reluctant to invest, energy is one of the few areas with an opportunity to add jobs and revenue. Legislation will send a clear message that energy capital and jobs are valued in our state.

             

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