An Economic Development Plan
for Southern Louisiana
Non-Conventional Energy:
3 Opportunities
1
Introduction
Creating the Conditions for Wealth Creation
While some may feel that Louisiana should simply
maintain what is has left of its energy industry,
GNO, Inc. determined that we can do better.
By correcting our existing tax and incentive structure,
Louisiana has an opportunity to create significant new
revenue and jobs from existing energy sources - in an
environmentally friendly manner.
2
Introduction
3 Opportunities
Opportunities
Potential Benefit
1) Deep Exploration of Natural Gas
• $25 billion in new mineral revenues
2) Enhanced Oil Recovery
• 6,500 new jobs
3) Pet-Coke Gasification for
Electricity
• $8 billion in new job earnings
• 765 BCF of sequestered CO2
Note: Economic impact 2009-2040.
Unless otherwise noted, estimates from
Dr. James Richardson, LSU.
3
1) Deep Exploration of Natural Gas
• Deep Exploration is defined as
drilling for natural gas below
15,000 feet
• Seismic and permitting activity
indicate no significant drilling to
come
• 90% of independents active in 2002
no longer working South Louisiana
• Experts agree the unexplored
territory could yield up to 30 TCF
of natural gas
4
1) Deep Exploration of Natural Gas
Current Situation: Despite vast reserves, non-conventional exploration
for natural gas in LA has virtually halted. All precursors predict no
activity in the next decade.
Louisiana Gas Production
State Offshore
Natural Gas and Casinghead Gas
(1970-2007)
700,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
19
7
19 0
7
19 1
7
19 2
7
19 3
7
19 4
7
19 5
7
19 6
77
19
7
19 8
79
19
8
19 0
8
19 1
82
19
8
19 3
84
19
8
19 5
8
19 6
8
19 7
88
19
8
19 9
90
19
9
19 1
9
19 2
93
19
9
19 4
95
19
9
19 6
97
19
9
19 8
9
20 9
00
20
0
20 1
02
20
0
20 3
04
20
0
20 5
0
20 6
07
T h o u s a n d C u b ic F e e t ( M C F )
600,000,000
Year
5
1) Deep Exploration of Natural Gas
Current Situation: Federal Tax Structure simply a 1/8 royalty; LA has
higher royalty as well as severance and property and sales taxes.
F
OCS vs LA State Tax Structure
$140.0
$120.0
$100.0
F
e
d
Severance Tax
e
Parish Property Tax
r
State Sales Tax
a
Parish Sales Tax
Royalty Tax
$80.0
$60.0
$40.0
$20.0
$‐
OCS Tax/Cost Structure in $
millions
State Tax/Cost Structure in $
millions
6
1) Deep Exploration of Natural Gas
Solution: LA offers royalty and severance holidays until payout of state
property, and eliminates other taxes.
OCS vs LA State Tax Structure
Severance Tax
$140.00
Parish Property Tax
$120.00
State Sales Tax
$100.00
Parish Sales Tax
$80.00
Royalty Tax
$60.00
$40.00
$20.00
$‐
OCS Tax/Cost
Structure in $
millions
State Tax/Cost
Structure in $
millions
Proposed State
7
1) Deep Exploration of Natural Gas
Benefit: Projected new mineral revenues, 2009 through 2040 - after
exploration costs are fully recovered - exceed $18 billion.
8
2) Enhanced Oil Recovery
• Enhanced Oil Recovery involves
using an injectant to free stranded
oil deposits
• DOE estimates that LA has over 9B
barrels of stranded oil
• Enhanced oil recovery is a natural
for LA because
1. we have industrial producers of
CO2
2. a bountiful feedstock for
gasification which produces
CO2
3. an extensive pipeline system to
transfer CO2 from producers to
old oil fields
9
Greater New Orleans, Inc.
Locations of oil fields suitable for EOR using CO2
Source: Advanced Resources International on
behalf of the US Department of Entergy
10
2) Enhanced Oil Recovery
Current Situation: Despite Louisiana having hundreds of significant
potential EOR sites, representing millions of barrels of stranded oil, LA is
by-passed in favor of TX and MS which have more favorable tax rates.
11
2) Enhanced Oil Recovery
Current Situation: LA severance tax for EOR is dramatically higher than
for its neighbors.
Louisiana*
Mississippi
Texas
6.25%
3.00%
1.15%
*Severance Tax $0 until payout, then 12.5%
12
2) Enhanced Oil Recovery
Solution: LA cuts severance tax by 75%.
Cut Severance Tax by
50%
Louisiana
Mississippi
Texas
3.00%
3.00%
1.15%
13
2) Enhanced Oil Recovery
The Benefit: EOR can produce millions of barrels of stranded oil and
generate new revenues.
14
3) Pet-Coke Gasification for Electricity
Gasification utilizing pet-coke allows a “green” future for our
petrochemical industries.
Gas Stream Cleanup/
Component Separation
Source: Gasification Technologies Council
Gasifer
Fuels
Syngas
Chemicals
CO/H2
Coal
H2
Particulates
Gaseous
Constituents
Biomass
Feedstock
Petroleum
Coke
Transportation Fuels
H2
Sulfur/
Sulfuric Acid
Fuel Cell
Solids
Combustion Turbine
Waste
Oxygen
Air
Electric Power
ASU
Marketable
Solid Byproducts
Air
Exhaust
Steam
Water
Stack
Exhaust
CO2
Steam Turbine
Electric Power
1
15
3) Pet-Coke Gasification for Electricity
• Gasification can produce environmentally friendly base-load electricity
cost competitively versus natural gas.
• LA produces 1/8 of the world’s supply of pet-coke as waste product
from the refining process. Pet-coke is an ideal feedstock for Gasification.
• The products of gasification are Hydrogen, Carbon Monoxide (CO) and
CO2. Hydrogen and CO2 are commonly called “Syngas” and are used for
both power generation and petrochemical feedstocks at existing sites in
LA and the US.
• Pet-coke gasification is green because a) a clean means of releasing petcoke’s energy, b) producing Hydrogen to help our existing
petrochemical industries meet the newest, and lowest emission
standards.
16
3) Pet-Coke Gasification for Electricity
Current Situation: LA produces 1/8 of the world’s pet-coke, but ships it
all overseas where it is burned without controls.
17
2) Pet-Coke Gasification for Electricity
Current Situation: Recent Federal legislation promotes gasification
of pet-coke.
• 20% Tax credit on cost to build gasification facility in 1st year up to
qualified aggregate credits of $2.5 billion.
• Up to $800 million in Federal tax credits for integrated gasification
combined cycle project over next 3 years.
• Additional $250 million in qualifying gasification credits for projects
that include equipment that separates and sequesters at least 75% of
the project’s total CO2 emissions.
• Recapture of credit for failure to sequester.
18
2) Pet-Coke Gasification for Electricity
Solution: Louisiana should encourage this new technology by
providing CO2 pipelines to facilitate carbon credits for gasification
facilities.
• Transfer of man-made CO2 from industry to users for out of state EOR,
should not be incentivized. Want to utilize CO2 produced in LA for EOR
in state.
• Utilize Economic Development District bonds to connect industrial CO2
produces to users via pipelines.
• Create a free market system that allows pipeline bond to be paid for
with CO2 revenues.
19
2) Pet-Coke Gasification for Electricity
Benefit: LA produces inexpensive, environmentally-friendly energy.
• Reduces global CO2 emissions significantly by capturing CO2
from millions of tons of pet-coke.
• LA uses technology to release the energy of its abundant
supply of pet-coke in an environmentally-friendly, clean way
versus current practices and uses overseas in cement plants.
• Gasification generates hydrogen, required by our oil refining
industries to meet the newest, lowest emission standards.
• Produces low cost electricity at a reduced cost versus new
conventional gas fired generation.
• Creates opportunities for enhanced oil recovery in LA
20
Recap
3 Opportunities
Opportunities
Potential Benefit
1) Deep Exploration of Natural Gas
• $25 billion in new mineral revenues
2) Enhanced Oil Recovery
• 6,500 new jobs
3) Pet-Coke Gasification for
Electricity
• $8 billion in new job earnings
• 765 BCF of sequestered CO2
Note: Economic impact 2009-2040.
Unless otherwise noted, estimates from
Dr. James Richardson, LSU.
21
22
Key Contacts
Michael Hecht
President & CEO
GNO, Inc.
(504) 715-5037
mhecht@gnoinc.org
Andrea St. Paul Bland
SVP Business Development
GNO, Inc.
(504) 460-1619
abland@gnoinc.org
Dr. James Richardson
Public Administration Institute - Professor & Director
Department of Economics - Professor
Louisiana State University
(225) 578-6743
parich@lsu.edu
23