On July 31, 1994, Louisiana halted all taxes on hydrocarbon production from new wells in the state for the initial 23 months post-completion or until well cost payout, whichever occurred first, in efforts to stimulate oil & gas activity and promote economic growth. To evaluate the impact of the new severance tax provision, I gathered county-level panel data on all the new wells in Texas and Louisiana parsed by county—and parish—before and after the policy change. Using Texas as a control group, pre and post-treatment comparisons of the growth in wells in each state provide estimates of the effect of the tax break on Louisiana’s energy industry. I specifically study changes in the same outcome variable, new wells, by five distinct geographical regions within both states as robustness checks to provide supporting evidence of the causal effect of the law: 1. localities within the Haynesville Shale, 2. all localities of Texas and Louisiana as a whole, 3. localities along the Texas-Louisiana border, 4. comparable localities in specific regions of each state, and 5. and specific localities within Louisiana. Contrary to the intent of the law, I find no indication that the new tax break increased growth in Louisiana.
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