Hosed at the Pump: Where are the Highest Gas Taxes in The Nation?

Townhall.com ^ | June 4, 2014 | Mike Shedlock

[Citizen Tom Paine]

The old,old rule used to be that it cost $500,000 to drill the well and you planned to get $15 million out of it. This was in the early 60s.

[BobL]

Unfortunately our gas taxes are TOO LOW here in Texas.

This has led to the end of new freeways and even the end of adding free lanes to existing freeways - now you PAY THROUGH THE TEETH (at least 10, maybe 20 times what an increased gas tax would have cost you) if you want to travel on a new, limited access highway lane.

[justlurking]

Not the companies who have to buy crude on the open market. Do you think it costs them $95 a barrel to pump it out of the ground and transport it to the refineries?

Yahoo publishes the profit margin for the major integrated oil & gas companies:

http://biz.yahoo.com/p/120conameu.html

The average net profit margin is 5.10%.

[Smokin' Joe]

As you can see, it is much more profitable to own the well.

Unless the well is a dry hole. Then the costs of drilling, attempted completion, and reclamation of the site are just an expense.

Before the Bakken boom, wildcat wells in the Williston Basin were producers at a rate of 1 in 4 attempts, which is really attractive. I have worked in areas where that productive well to dry hole ratio is one in 75 (Nevada). The productive wells in the latter case tended to make thousands of barrels of oil per day, so the risk was considered worthwhile by some operators.

[Smokin' Joe]

Wow, that is an old, old rule. Nowadays, a Bakken well on a 1280 acre spacing (horizontal well), from lease to completion costs about 10 million. Some companies have managed to shave a million or two off of that (pad wells, less earthwork, fewer rig moves), but it is a good ballpark figure.

[dalereed]

In 74, Joe Shell, the Pres. of the independent oil producers of California that the taxes from ground to pump in California was 78%.

the VPs at Union Oil said that at that time they had 400 years of reserves that would supply the US if consumption doubled every 100 years.

As a disclaimer, I used to have lunch with them at Little Joes in LA at least once a month so the 400 number could have a little gin mixed in!

[thackney]

Now it is $5~10 million for the well and the production fall of rate looks like:

http://www.ogj.com/articles/print/vol-110/issue-10/exploration-development/us-shale-oil-output-likely-to-offset.html