Posted June 24, 2020

LSU Center for Energy Studies Releases Transportation, Energy Policy Report

cover image of transportation reportLouisiana’s highway system consistently ranks poorly in traffic congestion, air pollution, accidents, and road conditions. Cities are burdened with immense levels of congestion relative to their size and population. The state experiences above-average traffic fatalities per vehicle mile traveled (VMT): Almost 800 lives were lost in collisions in the state in 2018. The pavement quality within the state is among the worst in the nation, and air pollution, while improving, is still a cause for concern.

In a new white paper, LSU Center for Energy Studies Assistant Professor Cody Nehiba examines the status of Louisiana’s transportation system and transportation energy policies. He develops policy recommendations for improving Louisiana's transportation network that align the private costs of driving with the full social costs of driving, which include the costs of pollution, congestion, accidents, and road damage.

“Some simple policy changes could address these issues,” Nehiba said. “First, increasing the state’s gasoline tax would reduce congestion, pollution, and accidents. Replacing diesel taxes with taxes that charge freight trucks on both the weight of their vehicle and miles driven would reduce the number of fatal collisions and preserve the state’s roads. And finally, electric vehicle subsidies must be combined with efforts to reduce emissions from electricity generation to improve air quality.”

Nehiba uses data from the Louisiana Department of Transportation and Development and the U.S. Federal Highway Administration to show that Louisiana’s VMT has increased more rapidly than neighboring states, a likely cause of the state’s congested roadways. The above-average VMT, along with below-average transportation funding and infrastructure investment, strain the state’s transportation system and expose underlying issues.

Louisiana currently has the 43rd lowest gasoline tax in the U.S. at only $0.20 per gallon and is among four states that have not changed their gasoline tax rate for the past 25 years or more (the other three are Texas, Nevada, and Colorado). Most fuel taxes were and continue to be levied to fund road infrastructure and repair, but they can also help align the private and social costs of driving. Nehiba illustrates how a gasoline tax increase to $0.30 per gallon may be able to remedy some of Louisiana’s transportation issues.

“The most significant outcome of an increase in the gasoline tax would be a reduction in travel demand,” he said. “Drivers would likely choose more fuel efficient vehicles, switch to public transportation, walk instead of drive, and reduce the quantity or length of some leisure trips. These adaptations would help reduce congestion, fuel consumption, and accidents.”

There are indications that some of these ideas are gaining traction within the state, Nehiba notes. “Residents and policy makers acknowledge the condition of the state’s infrastructure,” he said. “Recent efforts to increase the gasoline tax are evidence of their desire to implement policy.”

View or download the report.


Posted May 28, 2020

2020 Analysis Released: Meeting Louisiana’s Rising Industrial Energy Demands through Demand Response

cover of demand response reportA new white paper by LSU Center for Energy Studies Assistant Professor Brittany Tarufelli analyzes a method regional electrical utilities can use to better meet Louisiana’s surging industrial energy demands.

“As Louisiana’s largest industries grow, so do their energy needs, and Louisiana needs to find ways to make that energy as affordable and reliable as possible,” said Tarufelli. “Ultimately, expensive or disrupted energy could mean losing major economic opportunities to other states.”

In “Foundations for an Intelligent Energy Future: Demand Response Potential in Louisiana,” Tarufelli’s analysis focuses on how Louisiana can best apply demand response, a method for electricity utilities to communicate with and incentivize industrial customers to shift peak energy consumption away from utilities’ peak demand periods. The paper highlights numerous benefits Louisiana can reap by increasing participation in demand response programs. These include minimizing spikes in energy demand and corresponding prices, reducing the risk of blackouts and energy transmission congestion; and enabling utilities to leverage current energy production facilities rather than build new power plants.

“Effective demand response programs can lower electricity prices, system costs, and run the electricity grid more reliably in transmission-constrained regions,” said Tarufelli. “They can be a major tool to keep Louisiana’s economy competitive in the long haul.”  

According to Tarufelli, Louisiana is uniquely poised to increase demand response participation among its industrial customers. Driven by energy-intensive chemical, petroleum, and natural gas industries, Louisiana is a top state in terms of total per-capita energy consumption. In addition, the state’s energy-intensive industrial sector is forecast to grow over the next three years, with 125 projects across 12 industries, valued at $32 billion.

The paper highlights that the state could easily offer its largest energy users access to a variety of utility- or market-administered, incentive-based and price-based demand response programs; however, several barriers currently prevent Louisiana from achieving the benefits of demand response. The paper presents recommendations based on best practices that can be utilized by stakeholders, including the Louisiana Public Service Commission, to remove barriers to participation and design compensation mechanisms that would allow for increased participation in demand response programs.

View or download the report.

Posted March 9, 2020

LSU Researchers Submit La. Mineral Revenues Recommendationscover of mineral revenues report

Professors Gregory B. Upton, LSU Center for Energy Studies, and James A. Richardson, LSU Public Administration Institute, have authored the report “Mineral Revenues in Louisiana,” prepared in response to Senate Concurrent Resolution 4 of the 2018 second extraordinary session. The report is a continuation of work from the Task Force on Structural Changes in Budget and Tax Policy created by House Concurrent Resolution 11 of the first extraordinary session of 2016.

In the report, Upton and Richardson take a broad and long-term look at Louisiana’s severance tax system. After having met with public and private stakeholders, reviewing the literature on the taxation of oil and gas, and analysis of statistical information, they have prepared recommendations on how the legislature might simplify the tax system, as well as general information and analysis to aid in policy decisions.

Their major recommendations are 

  1. Institute an equivalent volumetric tax rate for oil and natural gas with rate to be established
  2. Remove exemptions associated with horizontal drilling, tertiary wells, and deep wells for new activity;
  3. Implement recommendations (1) and (2) simultaneously while maintaining revenue neutrality
    with respect to current severance tax projections;
  4. Implement the new severance tax rates for oil and gas production from new activity; activity originated before tax law change will comply with the current tax structure.

These recommendations are consistent with a broad base and low rate philosophy, revenue neutrality for severance tax collections, and administrative efficiency.

Alternative recommendations are

  • Establish a volumetric tax rate for oil with the rate to be established semi-annually;
  • Remove the verbiage “posted field price” from R.S. 47:633 (7);
  • Review and simplify the calculation of the volumetric rate for natural gas and establish the rate
  • Remove exemptions associated with horizontal drilling, tertiary wells, and deep wells while
    maintaining revenue neutrality with respect to current severance tax projections.

View or download the report here.