TOTAL MINERAL REVENUE

Louisiana produces crude oil, natural gas, sulfur, salt, gravel, and lignite. The state takes in revenue: 1) Directly from production of mineral resources when they are produced within the state boundaries. If the minerals are produced from lands owned by the state or from water bottoms, the state receives additional revenue. 2) Indirectly from production of mineral resources from lands owned by the federal government within state boundaries, in which case the state receives a 50% share of the royalty revenue. From the Federal OCS, Louisiana only receives revenue from the 8g section which lies between 3 miles and 6 miles from shore. These are further discussed in Appendix C.

Minerals produced within the state boundaries provide direct revenues to the state in the following forms:

• Severance taxes on all minerals production.
• Bonuses before leasing the land, if on state properties.
• Rentals after leasing if it is not in production or under active development, if on state properties.
• Royalties and overrides if it is in production, if on state properties.
• A share of the mineral revenue (bonus, rental and royalty), for federal properties if the deposit is on federal public lands, lands administrated by the U.S. Army Corps of Engineers, or military lands.

The main objective of this report is to focus on oil and gas production and its effects on severance tax, royalties on state lands, and bonuses and rentals on state leases. In this report we refer to the sum of royalties on state lands, severance taxes, and BR&O as Total State Mineral Revenue. These revenues were discussed in previous chapters.

Total state mineral revenue will have a very hard time ever matching the FY1981/82 level because oil and gas production is declining, price increases are not proportional to production declines, most Louisiana producing fields are mature, and the cost of finding new fields is high. The expected total revenue from minerals production is $604.18 million in FY1997/98, $553.83 million in FY1998/99, and $533.97 in FY1999/00. The preceding plot, Figure 15, shows fiscal year total mineral revenue by type.

State oil and gas production peaked in FY1970/71, at 577 million barrels for oil and 5.5 trillion cubic feet for gas. Mineral revenue peaked in FY1981/82 at $1.61 billion. In FY1981/82, average oil prices were around $35.00 per barrel and average gas prices around $2.00 per MCF; oil production was 194 million barrels and gas production was 2.44 trillion cubic feet. Oil and gas production in FY1980/81 was less than half of FY1970/71 production. Gas production in FY1996/97 was less than a third of FY1970/71 production, and oil production in FY1996/97 was less than a quarter of FY1970/71 production. Barring some kind of breakthrough development, this decline will continue.

The $1.61 billion state revenue from mineral resources in FY1981/82 will be very hard to ever repeat, even if the price of oil goes back to $35.00 per barrel tomorrow. The major dollar component in mineral revenue comes from oil production as shown in Figures 8 and 11. Louisiana state oil production has dropped 30.9% in the last decade. In FY1984/85 it was around 186 million barrels. In FY1996/97 oil production dropped to 135 million barrels. Oil prices will not be above $25.00 per barrel until 2015 according to projections by the U.S. Department of Energy.

The following table shows actual revenue from fiscal year FY1979/80 through FY1996/97, and estimated revenue from FY1997/98 through FY2002/03, and the percent changes in mineral revenue from the previous year.

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