Louisiana Oil and Gas Association Endorses Legislation for Natural Gas Cooperatives

Strategic Insights -

The Louisiana Independent Oil and Gas Association (LIOGA) has formally endorsed federal legislation that would enable the formation of natural gas producer cooperatives. At its annual meeting, LIOGA Chairman Bob Meredith emphasized the importance of this legislation, stating that it would provide greater efficiency and economies of scale, enabling producers to better manage their inventories and provide consumers with additional reliable sources of natural gas. The cooperatives would also help to dampen price volatility and restore competition to a market dominated by a handful of large marketing companies.

Key Takeaways:

  • The proposed legislation would permit America's 8,000 independent producers to market their natural gas directly to consumers through cooperatives.
  • The cooperatives would provide greater efficiency and economies of scale, enabling producers to better manage their inventories and provide consumers with additional reliable sources of natural gas.
  • The average independent gas producer has only 2.5 million cubic feet per day of production, making them too small to contract directly with consumers and forcing them to funnel sales on the spot market through marketing companies.
  • The marketing companies control billions of cubic feet of supply daily and hold all the cards when it comes to futures trading, adding to market volatility.
  • LIOGA represents the independent sector of the Louisiana oil and gas industry and its primary goal is to provide the industry with a solid working environment to help enhance and support it.
  • The cooperatives would be a lifeline for independent producers, generating higher federal and state revenues in the form of severance taxes, royalty payments, and income taxes paid by geologists, drillers, and service company personnel.
  • LIOGA urged all Louisiana producers to lobby their state and federal elected officials on behalf of the co-op bill, which is expected to be introduced in Washington this spring.

Statistics:

  • 8,000: the number of independent producers in the United States that would benefit from the proposed legislation.
  • 2.5 million: the average daily production of natural gas for an independent producer.
  • Billions of cubic feet: the amount of supply controlled by marketing companies daily.
  • Higher federal and state revenues: the amount that cooperatives would generate in the form of severance taxes, royalty payments, and income taxes paid by geologists, drillers, and service company personnel.

Sources:

  • "LIOGA Endorses Federal Legislation for Natural Gas Cooperatives". PRNewswire, March 27.