Louisiana House Bill HB364

Louisiana 2017 Regular Session

• Introduced: 3/31/17
• Refer: 3/31/17
• Refer: 4/10/17
• Report Pass: 5/8/17

Caption

Provides with respect to the rate and base for the state tax on certain natural resources severed from the soil or water (EG -$89,000,000 GF RV See Note)

Impact

The proposed adjustments to the severance tax are projected to have significant economic implications for the state. By decreasing the tax burden on oil production, supporters argue that it could lead to increased drilling activity and job creation within the industry. However, these changes may also result in a decrease in state revenue from severance taxes, which are critical for funding public services. The fiscal implications of the bill have raised discussions among legislators about balancing economic growth with necessary state funding.

Summary

House Bill 364 seeks to amend the existing severance tax laws in Louisiana by reducing the severance tax rate for oil and certain natural resources from 12.5% to 8% of value. It also extends the duration of the severance tax exemption for production from horizontally drilled wells from 24 months to 60 months. This change is expected to offer financial relief to oil producers and may stimulate further investment in drilling activities in the state. The bill provides specific thresholds based on the market price of oil and natural gas, ensuring that the exemption is aligned with current market conditions.

Sentiment

General sentiment surrounding HB 364 appears mixed among lawmakers. Proponents, primarily from the oil-producing regions, express strong support for the bill, believing it will bolster the local economy and support job growth in the energy sector. In contrast, some legislators and advocacy groups are concerned about the potential decrease in state revenue, asserting that such tax relief measures could disproportionately benefit large oil companies at the expense of public investments. This reflects broader concerns regarding whether the benefits of the bill will be distributed equitably across Louisiana's communities.

Contention

Notable points of contention include the potential loss of revenue for the state versus the benefits of promoting the oil industry. Critics argue that while the bill aims to incentivize production, it could exacerbate budget shortfalls that affect education, infrastructure, and social services. Furthermore, there are debates about the effectiveness of such tax incentives, with some lawmakers questioning whether they will lead to sustained economic growth or merely temporary gains. The exemption’s applicability only to specific types of wells and the strict conditions surrounding it also raise questions about fairness and the implementation process.