Data Sources and Methods
How Local Governments Receive Revenue From Unconventional Oil and Natural Gas Production Data Sources and Methods March 2015 This document describes the data and methods used to generate the interactive data tool, “What Do Local Governments Receive from Oil and Gas Production Taxes?” (http://headwaterseconomics.org/interactive/oil-gas-local-governments-production-tax-revenue) The interactive first describes well performance in terms of monthly and cumulative oil and natural gas production of horizontally completed and fractured wells in “unconventional” shale plays across the U.S. Well performance is defined as high, average, and low for each play and production value is estimated by adding recent commodity prices for oil and natural gas. Next, the interactive describes production revenue by applying each state’s fiscal policy to the well performance data specific to each unconventional shale play(s) in that state. Total production tax revenue is estimated for wells completed on private, state, and federal land. How these revenues are distributed between state and local governments, the amount investing in permanent savings, and the value of tax expenditures are also estimated. Tax expenditures are defined as direct incentive to industry and as production tax revenue used to lower other taxes, including property and income taxes. WHY IS IT IMPORTANT? The benefits communities receive from oil and natural gas production depends on fiscal policy often set at the state level. Tax revenue that accrues to local governments depends on well performance, commodity prices, state fiscal policies, and the land ownership where wells are drilled. Unconventional oil and natural gas is extracted from tight shale formations using horizontal drilling and hydraulic fracturing technologies. Unconventional oil and natural gas plays require more wells to be drilled on a continuous basis to maintain production than comparable conventional oil and natural gas fields. This expands potential employment, income, and tax benefits, but also heightens and extends impacts on communities and public costs. Fiscal policy plays an important role in delivering revenue to local governments in the time, location, and amount necessary to mitigate the impacts associated with drilling activity and related population growth. Revenue is volatile over time, responding to changing prices and levels of production. Fiscal policy can moderate or exacerbate exposure to boom and bust dynamics. The interactive explores how the differences between state fiscal policies have an impact on the amount, timing, location, and predictability of returns to communities. This work contributes a method for comparing fiscal returns to local governments from unconventional oil and natural gas that can inform more detailed studies related to community outcomes.1 RELATED RESEARCH Headwaters Economics has compared state fiscal policies in a recent series of reports and defined a series of Fiscal Best Practices. We have also studied long-term economic performance of energy dependent counties. 1 Selection of Unconventional Oil and Natural Gas Plays The interactive shows data for 16 of the most active shale plays across the U.S. in 11 individual states. The plays were selected because they currently rank among the most productive unconventional oil and natural gas plays in the U.S. Most shale wells completed in the U.S. produce a mix of oil, dry natural gas, and natural gas liquids (NGLs). We also selected plays in a single state that represent predominantly oil or natural gas plays so that we could compare how state fiscal policies may differ as they apply to these two important fossil fuel resources. For this reason, we include four plays in Texas and two each in Colorado and Pennsylvania. Table 1: Characteristics of Selected Major U.S. Shale Plays State Arkansas Colorado Colorado Louisiana Montana New Mexico North Dakota Oklahoma Pennsylvania Pennsylvania Texas Texas Texas Texas Utah Wyoming Play Fayetteville shale Piceance basin Niobrara shale Haynesville shale Bakken/Three Forks shale Permian basin Bakken/Three Forks shale Woodford shale Northeast Marcellus shale Southwest Marcellus/Utica shales Barnett shale Haynesville shale Permian basin Eagle Ford shale Uintah basin Green River basin Predominant Resource Type Dry gas Dry gas Oil, NGLs, Dry gas Dry gas Oil Oil, NGLs, Dry gas Oil Dry gas Dry gas Dry gas, NGLs Dry gas Dry gas Oil, NGLs, Dry gas Oil, NGLs, Dry gas Oil, NGLs, Dry gas Dry gas Reservoir Fayetteville various Niobrara-Codell Haynesville Bakken, Three Forks Bone Spring, Delaware, Wolfcamp Bakken, Three Forks Woodford Marcellus Marcellus, Utica Barnett Haynesville Bone Spring, Trend, Wolfcamp Eagle Ford Wasatch-Mesa Verde Lance Production: Monthly and Cumulative Production Curves SAMPLE OF PRODUCING WELLS Methods: Data on region-specific production was collected through DI Desktop, a proprietary oil and natural gas industry data source.* For each region, we collected monthly oil and gas production levels for individual wells completed after January 1, 2007. We chose 2007 because it allowed us to access relatively recent data, which is important due to the rapid technological advancements that continue to occur. Using 2007 as a starting point also allowed us gather at least five years of production data with a fairly large sample size of producing wells (see Table 2). The number of wells in each region represents one well producing for at least one month. Data are normalized to align the starting month of each well regardless of the actual start date. In several plays, including Pennsylvania Northeast, Texas Eagle Ford, and Utah Uintah, drilling activity began more recently than other plays examined here. As a result, data for later years of production from these plays are based on a small sample size. As a result, data for the tail end of the monthly and cumulative production curves are less reliable compared to production data for other regions which are based on larger sample sizes throughout our 60-month window. * We thank DI Desktop for the use of their data in this paper and the Energy Initiative at Duke University for invaluable assistance. 2 Table 2: Number of Producing Wells in Selected U.S. Unconventional Oil and Natural Gas Plays, 2007-2013. State Arkansas Colorado Colorado Louisiana Montana New Mexico North Dakota Oklahoma Pennsylvania Pennsylvania Texas Texas Texas Texas Utah Wyoming Play Fayetteville Niobrara Piceance Haynesville Bakken Permian Bakken Woodford Northeast Southwest Barnett Eagle Ford Haynesville Permian Uintah Green River Number of Wells Producing (One Month) 1,507 3,053 8,748 1,134 954 1,430 1,303 1,209 1,182 1,053 1,237 14,973 812 1,812 1,057 1,493 Number of Wells Producing (60 Months) 315 687 3,427 36 553 131 93 226 5 92 559 845 38 337 5 462 Table 2 shows that the sample of wells in the Colorado Niobrara shale includes 3,053 wells2 completed and producing for at least one month beginning on January 1, 2007.3 The sample drops to 687 wells that have been producing for 60 months. Data Source: Drillinginfo’s DI Desktop. “Drillinginfo” and “DI Desktop” are trademarks of Drilling Info, Inc. and, along with the Drillinginfo data reproduced herein, are used with permission. OIL PRODUCTION Methods: For each play, we created three profiles: an “average” production profile (arithmetic mean), a “high” production profile (the well that produced oil and gas at the 90th percentile), and a “low” production profile (the well that produced oil and gas at the 10th percentile). Table 3 shows oil production statistics for the average well in each of the selected unconventional plays. The average production profile represents a production figure for which half of wells in the sample exceeded, and half of the wells in the sample fell below. 3 Table 3: Monthly Oil Production from an Average Well in Selected U.S. Unconventional Oil and Natural Gas Plays, 2007-2013 State Arkansas Colorado Colorado Louisiana Montana New Mexico North Dakota Oklahoma Pennsylvania Pennsylvania Texas Texas Texas Texas Utah Wyoming Play Fayetteville Niobrara Piceance Haynesville Bakken Permian Bakken Woodford Northeast Southwest Barnett Eagle Ford Haynesville Permian Uintah Green River Initial Oil Production (Bbl/Month) 1 1,503 105 8 6,668 9,101 11,609 753 0 239 5 49,996 54 3,666 263 667 Oil Production Month 12 (Bbl/Month) 0 507 40 2 3,438 2,098 4,967 246 0 261 2 26,391 18 2,454 84 314 Oil Production Month 60 (Bbl/Month) 0 148 10 2 1,245 224 2,256 8 0 28 1 8,704 29 2,319 11 100 Cumulative Production After 60 Months (Bbls) 1 108 0 0 150,089 65 223,497 0 0 7,678 0 319,833 2 1,659 0 0 Percent Production Decline After One Year 100% 66% 62% 72% 48% 77% 57% 67% NA -9% 53% 47% 67% 33% 68% 53% Percent Production Decline After Five Years 100% 90% 91% 74% 81% 98% 81% 99% NA 88% 73% 83% 46% 37% 96% 85% Table 3 and Figure 1, for example, shows that oil production from the average well in the Colorado Niobrara peaked initially at 1,503 barrels per month, declined to 507 barrels per month after one year—a 66 percent decline in the first year—and to 148 barrels per month after 60 months—a 90 percent decline after five years. Cumulatively, the average Niobrara well produces 21,412 barrels of oil over five years. Figure 3 shows how the Niobrara well compares to average wells in 15 additional shale plays across the U.S. Data Source: Drillinginfo’s DI Desktop. “Drillinginfo” and “DI Desktop” are trademarks of Drilling Info, Inc. and, along with the Drillinginfo data reproduced herein, are used with permission. NATURAL GAS PRODUCTION Methods: For natural gas production, we construct the same average, high, and low production profiles for each play. Table 4 shows production in Mcf (thousands of cubic feet) of natural gas. Table 4 and Figure 1, for example, shows that natural gas production from the average Colorado Niobrara well peaked at 3,876 mcf per month, declining to 2,179 mcf per month after one year—a 44 percent decline in the first year—and to 995 mcf per month after 60 months—a 74 percent decline after five years. Cumulatively, the average Niobrara well produces 94,324 mcf of natural gas over five years. Figure 3 shows how the Niobrara well compares to average wells in 15 additional shale plays across the U.S. Data Source: Drillinginfo’s DI Desktop. “Drillinginfo” and “DI Desktop” are trademarks of Drilling Info, Inc. and, along with the Drillinginfo data reproduced herein, are used with permission. 4 Table 4: Monthly Natural Gas Production from an Average Well in Selected U.S. Unconventional Oil and Natural Gas Plays, 2007-2013 State Arkansas Colorado Colorado Louisiana Montana New Mexico North Dakota Oklahoma Pennsylvania Pennsylvania Texas Texas Texas Texas Utah Wyoming Play Fayetteville Niobrara Piceance Haynesville Bakken Permian Bakken Woodford Northeast Southwest Barnett Eagle Ford Haynesville Permian Uintah Green River Initial Natural Gas Production (Bbl/Month) 30,214 3,876 25,310 240,738 2,920 21,634 10,140 78,065 73,306 43,590 72,044 11,711 184,486 5,743 46,719 70,395 Natural Gas Production Month 12 (Bbl/Month) 26,154 2,179 10,889 92,451 2,582 10,247 4,462 36,498 118,772 54,591 27,023 5,806 61,348 5,383 14,180 34,691 Natural Gas Production Month 60 (Bbl/Month) 6,033 995 3,256 4,833 1,460 2,770 1,654 9,854 3,178 4,012 9,715 363 9,530 5,626 4,810 11,789 Cumulative Production After 60 Months (Bbls) 1,031,957 94,324 455,396 3,373,136 124,865 426,286 187,843 1,507,876 3,319,361 1,432,196 1,206,802 273,840 2,328,953 334,911 665,002 1,450,404 Percent Production Decline After One Year 13% 44% 57% 62% 12% 53% 56% 53% -62% -25% 62% 50% 67% 6% 70% 51% Percent Production Decline After Five Years 80% 74% 87% 98% 50% 87% 84% 87% 96% 91% 87% 97% 95% 2% 90% 83% COMPARING PRODUCTION PROFILES For the purposes of comparing production profiles between plays that have unique production characteristics and different mixes of oil, natural gas, and natural gas liquids, we convert natural gas from thousand cubic feet (Mcf) to barrels of oil equivalent (Boe). This calculation is based on average energy content estimates provided by the U.S. Energy Information Administration.4 The average energy content of one Mcf of natural gas is 1.025 million British thermal units (MMBtu), and the average energy content of one barrel of oil is 5.8 MMBtu. Therefore, we use a conversion factor of 5.658 Boe per Mcf of natural gas produced. Figure 1 shows an example of monthly and cumulative production of oil and natural gas based on barrels of oil equivalency. Data Source: Energy Information Administration (EIA). Energy calculators, natural gas conversion calculator (Btu) and crude oil conversion calculator (Btu). Figure 1: Monthly Production for Average (p50) Well; Niobrara, CO 5 Figure 2: Total Monthly Production by Productivity; Niobrara, CO Figure 3: Monthly Production by Play (Niobrara, CO is Highlighted) The decline curves shown in Figures 1 and 2 are consistent with other assessments of unconventional oil and natural gas plays. The U.S. Energy Information Administration provides analysis of decline curves from unconventional plays each year as part of the Annual Energy Outlook, finding that wells in the Bakken in Montana and North Dakota, the Eagle Ford in Texas, and the Wolfcamp in New Mexico and Texas, among others, demonstrate relatively high initial production with subsequent steep declines.5 In reality, no two wells are identical. Wells with different production and cost profiles will return different amounts of revenue and effective tax rates within a single state’s tax structure. The shape of the production decline curve (how quickly production declines) and the rate (size) of initial production affect the estimated ultimate recovery (EUR) of each well. The EUR is equivalent to cumulative production over the life of the well. The shape of the production decline curve also has bearing on how drilling incentives, stripper well exemptions, and other components of tax policy affect the effective tax rate and cumulative tax revenue. Because of these issues, the interactive includes the high and low production wells in each play. In the next section we apply commodity prices to the decline curves to estimate the production value of wells in the selected U.S. unconventional oil and natural gas plays. 6 Estimating Production Value Methods: To estimate the value of production from wells in each play, we applied an average constant price for oil and natural gas over the entire five-year production period. Although oil and gas prices fluctuate over the lifetime of a well, affecting the cash flow and associated government revenue stream, we use constant prices for each region to identify the policy factors (as opposed to fluctuations in price) that affect government revenue from a given production profile. Table 5: Cumulative Oil and Natural Gas Production, prices, and Total Production Value, 20072013 State Arkansas Colorado Colorado Louisiana Montana New Mexico North Dakota Oklahoma Pennsylvania Pennsylvania Texas Texas Texas Texas Utah Wyoming Play Fayetteville Niobrara Piceance Haynesville Bakken Permian Bakken Woodford Northeast Southwest Barnett Eagle Ford Haynesville Permian Uintah Green River Average 2014 Oil Price ($/Bbl) $69.31 $68.68 $68.68 $76.53 $65.46 $67.32 $67.26 $72.83 $62.53 $62.53 $70.45 $70.45 $70.45 $70.45 $66.00 $67.52 Average 2014 Cumulative Natural Gas Cumulative Oil Natural Gas Price ($/mcf) Production Value Production Value $4.68 $81 $4,829,558 $4.62 $1,470,557 $435,776 $4.62 $114,394 $2,103,931 $4.58 $7,797 $15,448,963 $4.66 $9,824,804 $581,872 $4.64 $5,832,631 $1,977,966 $4.66 $15,032,436 $875,347 $4.59 $647,221 $6,921,149 $4.19 $0 $13,908,121 $4.19 $445,844 $6,000,901 $4.68 $5,473 $5,647,836 $4.68 $86,664,054 $1,281,574 $4.68 $83,617 $10,899,500 $4.68 $10,834,997 $1,567,382 $4.66 $238,221 $3,098,907 $4.66 $879,424 $6,758,883 Total Production Value $4,829,639 $1,906,334 $2,218,325 $15,456,760 $10,406,675 $7,810,597 $15,907,783 $7,568,369 $13,908,121 $6,446,745 $5,653,309 $87,945,627 $10,983,117 $12,402,378 $3,337,128 $7,638,307 Table 5, for example, shows that the average price of oil extracted in Colorado in 2014 was $68.68 per barrel based on the U.S. Energy Information Administration’s annual average first purchase price for Colorado,6 and for natural gas a price of $4.62 per mcf based on proprietary regional pricing data from Natural Gas Intelligence.7 Applying these prices to cumulative production value from wells completed in the Colorado Niobrara, the cumulative production value is Niobrara well is $1.9 million over five years. Oil contributes $1.47 million to the total value, and natural gas contributes $435,766. Figure 4: Cumulative Total Production Value by Play (Niobrara, CO is Highlighted) 7 Data Source: U.S. Energy Information Administration’s annual average first purchase price for Colorado. U.S. Energy Information Administration, crude oil first purchase price by area. http://www.eia.gov/dnav/pet/pet_pri_dfp1_k_m.htm. Based on proprietary regional pricing data from Natural Gas Intelligence. Natural Gas Intelligence Shale Daily, May 2014. http://www.naturalgasintel.com/about_ngidata. Revenue: State Production Tax Structure TYPES OF PRODUCTION TAXES Revenue from the direct production of oil and natural gas accrues to state and local governments from a variety of sources: state severance taxes, local government property (ad valorem) taxes, impact fees and regulatory fees and governmental royalties. State severance taxes: In general, a "severance tax" is a production tax levied on the value or volume of oil and natural gas extracted or “severed” from the earth. Severance taxes based on value typically levy a tax rate on the value of production at the wellhead. Severance taxes based on volume levy an indexed fee per barrel of oil or mcf of natural gas. Local government property taxes: In many states, including Colorado, Wyoming, and Texas, local governments levy property taxes on the production value of oil and natural gas. Property taxes are also called ad valorem taxes, which means “by value.” Impact fees and regulatory fees: Pennsylvania is the only state in our selected plays that does not levy a severance tax. Instead, the state levies an impact fee per well, indexed to prices. Most state regulatory agencies also levy a modest fee to fund the agencies activities. These fees can either be on the value or volume of production. Governmental royalties: Royalties are production taxes paid to the owner of the resource, including federal, tribal, state, and private landowners. Federal and state royalties are common, particularly in the Western U.S. We include royalties in this analysis because royalties are often an important source of revenue for local governments. Companies also pay bonuses (a premium paid to win a leasing contract to drill in a specific area) through the competitive leasing process, and fees or rents to maintain a lease. Production taxes, royalties and fees are levied in addition to other taxes that form the general tax structure of each state. Drilling related activity are subject to sales and income taxes in the same way these taxes apply to all economic activity in each state. Other aspects of the general tax base are not included in this analysis, however they can also be important sources of revenue in some states. For each type of production tax in each state, we estimate total revenue collections and the government take (or the effective tax rate). The general formula to estimate production tax revenue is: Revenue = (tax base – (deductions + exemptions)) * (base tax rate – (tax incentives + tax exemptions)) The discussion below provides a general overview of our methods. To make these estimates, we have to understand how the tax base is defined, what the base tax rate is, what incentives, deductions, and exemptions are offered, and the timing of revenue collections. TAX BASE Methods: The tax base is typically production value or production volume at the wellhead. Production taxes levied on production value are most common. Production value is volume times price. Because the resource is often sold at a point downstream from the wellhead (at a pipeline hub or to a consumer including refineries), transportation and processing costs between the wellhead and the point of sale are often deductible from the first market price. Some production is also exempt from the tax base. Many 8 state severance tax policies exempt the royalty interest in production from the tax base. Resources used on site are also exempted—for example, natural gas extracted from the well that is used to power equipment at the well site. The tax base can also be the volume of the resource. Typically applied to natural gas, indexed prices are used per mcf of natural gas extracted. Some state conservation fees are also based on a per-barrel or permcf basis. In some states, local governments define the taxable value of oil for property tax purposes as the value of reserves in the ground, not based on production as it occurs. The so-called income approach applies local property tax levies on the expected value of production over the life of the reserve. For example, local property taxes in Texas are based on the income approach. Pennsylvania applies an impact fee that is based on the productivity of the well, and is indexed to prices. BASE TAX RATE Generally, states apply a single tax rate for each specific production tax. However, base tax rates can vary with price (North Dakota), the income of the producer (Colorado), and for the working and non-working production interests in each well (Montana). For property taxes, the tax rate varies across each jurisdiction based on local mill levies. To estimate revenue derived from property taxes we apply the average mills levied by county governments and school districts that have significant unconventional oil production. For taxes based on indexed prices, the tax rate can be calculated as the effective rate, or the indexed tax per unit divided by the price of the resource at the wellhead. TAX INCENTIVES AND DEDUCTIONS Tax incentives provide for rate reductions for a variety of purposes, with the intention of inducing more drilling activity and production, promoting adoption of new technology, or encouraging conservation measures. The largest incentives specific to unconventional production include reductions in tax rates on newly completed horizontal wells for a defined period of time or until costs are recovered (sometimes called “tax holiday” incentives). Incentives in some states are only active when prices fall below established price thresholds (North Dakota), while other states provide for permanent incentives without regard to price (Montana). TAX EXEMPTIONS Exemptions typically include lower rates or no tax requirement for production from “stripper wells,” defined as wells producing less than a threshold amount of oil. Wyoming does not exempt stripper wells, while the most generous exemption is in North Dakota where stripper wells are defined as wells producing less than 30 barrels per day. Exemptions can also be tied to price thresholds (Montana). States have various other exemptions and deductions that are not applicable to new unconventional production. For example, new vertical wells, orphaned wells brought back into production, and various types of secondary and tertiary production all receive various exemptions and deductions. This comparison is focused specifically on new horizontally completed wells, so these aspects of state policies are not considered here, but may warrant additional attention as secondary production becomes more important in unconventional plays. TIMING OF TAX COLLECTIONS In general, state severance taxes are collected on a monthly basis. However, some states collected severance taxes quarterly (Montana) or annually (Colorado). By comparison, local government property 9 taxes are based on annual assessments, with tax assessments and collections occurring in the following year. As a result, local government property tax collections lag production typically by two years. COMPARING CUMULATIVE TAX REVENUE The interactive displays tax collections as a “curve” that shows the amount of revenue collected by each type of production tax, and the timing of collections based on five years of production from unconventional wells in each state. Figure 5 illustrates the tax curves for a single play—Colorado Niobrara. Figure 6 shows a comparison of cumulative revenue from all production taxes for all the selected plays. Figure 5: Monthly Cumulative Revenue by Type; Niobrara, CO Figure 6: Monthly Cumulative Revenue by Play (Niobrara, CO is Highligted) In Figure 5, the slope of the cumulative revenue curve reflects the timing of revenue collections. Colorado levies a state severance tax and local property taxes on an annual basis. As a result, in Colorado no revenue is collected in the first year of production for wells completed and revenue thereafter is stepwise. Figure 6 shows the revenue curves for each play. It shows that compared to revenue generated in the Niobrara in Colorado (dark red line), revenue generated from the Bakken in North Dakota (second tax curve from the top) assesses production taxes monthly, represented by the relatively smooth curve with the steepest slope in the first several years when production from the typical well is greatest. 10 Revenue: State Revenue Distribution Policy In general, state distribution polices treat every dollar of revenue in exactly the same way. However, in some cases, additional dollars of revenue are allocated in new ways. Allocating revenue in states that fall in the first category using strict proportional distribution systems is straightforward. The revenue generated from each well, regardless of its productivity or when it is drilled, is allocated in exactly the same way based on the allocation formula. In states that change allocations as additional revenue is collected, it is impossible to know exactly where revenue from any single well ends up. Instead, we summarize how cumulative revenue collections over an entire tax period (fiscal year or biennium) are distributed. The total annual distributions are illustrated in the context of a single well by assuming that revenue from the average well would be distributed in the same way. To simplify comparisons between states, we group distributions into four basic categories: state share, local share, permanent savings, and tax expenditures. STATE SHARE State share is any production tax revenue collected and retained by the state government for any governmental purpose. Many states deposit a share of production tax revenue into the General Fund, or allocate revenue to a variety of state agencies and purposes. LOCAL SHARE Local share is any revenue received by local governments, including direct property tax collections at the local level, direct distributions from state production tax collections, and impact grant programs funded with production tax revenue. It does not include state assistance that may be provided from other sources of governmental revenue. PERMANENT SAVINGS Permanent savings include allocations made to trust funds that have constitutionally or legislatively protected principal. A number of states have severance tax trust funds, or invest a share of production tax revenue into existing funds established for budget stabilization, school funding, or other purposes.8 TAX EXPENDITURES Tax expenditures are defined as the value of production tax incentives and tax relief funded with production tax revenue. Figure 7 shows the distribution of production tax revenue to state government, local governments, permanent savings (trust funds), and tax expenditures in a single play—Colorado Niobrara. Figure 8 compares these same revenue distributions for all the 15 selected plays. 11 Figure 7: Distribution of Production Revenue; Niobrara, CO Figure 8: Distribution of Revenue by Play (Niobrara is Highlighted) CONTACT INFORMATION Mark Haggerty, Headwaters Economics [email protected] | (406) 570-5626 ABOUT HEADWATERS ECONOMICS Headwaters Economics is an independent, nonprofit research group whose mission is to improve community development and land management decisions in the West. Endnotes 1 This same approach is used by other analysts. See, for example, Ernst & Young LLP. 2012. Analysis of Ohio Severance Tax Provisions of H.B. 487. Prepared by Ernst & Young LLP for the Ohio Business Roundtable. http://jobs-ohio.com/images/Ernst-Young-Severance-Tax-Analysis-Prepared-for-the-OhioBusiness-Roundtable-5-15-12.pdf. Also see Montana Department of Revenue. 2012. Oil and Gas Production Tax Comparison: Montana and North Dakota. Helena, MT. http://revenue.mt.gov/content/committees/legislative_interim_committee/oil_and_gas_prod_tax_comp_ju ly_rtic.pdf. 12 The data are not explicit as to which wells are horizontal or vertical. Since it’s a shale play, it’s likely that most are horizontal, however, Drillinginfo does not report this for Colorado (it does for other states), presumably because CO does not require this information as part of its reporting guidelines. 3 Drillinginfo’s DI Desktop. Average (P50), high production (P10), and low production (P90) well profiles based on monthly production data from over 1,000 individual wells starting production in the Niobrara and Piceance basins between 1/1/2007 and 12/31/2013. “Drillinginfo” and “DI Desktop” are trademarks of Drilling Info, Inc. and, along with the Drillinginfo data reproduced herein, are used with permission. 4 Energy Information Administration (EIA). Energy Calculators, Natural gas conversion calculator (Btu) and Crude oil conversion calculator (Btu). http://www.eia.gov/kids/energy.cfm?page=about_energy_conversion_calculator-basics. There are other conversion factors used as well. See for example: The California Centre for Energy uses six (http://www.centreforenergy.com/FAQs-All.asp?template=1,12&qcID=50&qID=308#FAQ); The Oak Ridge National laboratory, U.S. Department of Energy uses 6.089 (http://cdiac.ornl.gov/pns/convert.html#4); The Society of Petroleum Engineers uses 5.658 (http://www.spe.org/industry/docs/UnitConversion.pdf). 5 EIA 2013a. NEMS Model Documentation. 6 U.S. Energy Information Administration, crude oil first purchase price by area. http://www.eia.gov/dnav/pet/pet_pri_dfp1_k_m.htm. 7 Natural Gas Intelligence Shale Daily, May 2014. http://www.naturalgasintel.com/about_ngidata. 8 Wirtz, R.A. “Saving for a rainy, oil-free day.” fedgazette. Federal Reserve Bank of Minneapolis. September 3, 2013. 2 13
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