Louisiana House Bill HB516

Louisiana 2017 Regular Session

• Introduced: 3/31/17
• Refer: 3/31/17
• Refer: 4/10/17

Caption

Provides relative to the reductions to the rate of and exemptions from the severance tax (OR -$28,500 GF RV See Note)

Impact

The new provisions will directly affect the taxation of oil and gas, specifically for wells considered marginally incapable, which are defined as those producing less than 5,000 cubic feet of gas per day. The tax on natural gas from these wells will be set at a significantly lower rate of 0.65 cents per thousand cubic feet. This modification in tax policy is expected to provide economic relief to operators of lower-producing wells, encouraging continued production rather than abandonment, potentially leading to an increase in overall energy production in the state.

Summary

House Bill 516, also known as the Severance Tax Reduction Act, focuses on lowering the severance tax rates for oil and natural gas produced from incapable wells and stripper wells. The bill aims to eliminate the previous requirement for the Louisiana Department of Revenue to certify a well's status before it is eligible for a reduced tax rate, thereby simplifying the process for severers. Instead, severers will now only need to submit a production report demonstrating the reduced capability of their wells to qualify for tax reductions. This change is intended to foster a more efficient regulatory environment for oil and gas production in Louisiana.

Sentiment

The sentiment around HB 516 appears supportive among industry stakeholders, particularly operators of smaller or marginal wells who benefit from the cessation of stringent certification requirements. Advocates argue that this bill promotes economic growth within the Louisiana natural resources sector, aiding small businesses and enhancing competitiveness. On the other hand, some critics may express concern over the potential decrease in state revenue from reduced tax collections, suggesting a need for a careful balance between industry support and fiscal responsibility.

Contention

A notable point of contention may arise over the removal of the certification requirement, as opponents might argue that this could lead to discrepancies in tax exemptions and a lack of oversight on well operations. While proponents believe the policy will streamline operations and reduce administrative burdens, there could be discussions around ensuring proper reporting and compliance to prevent abuse of the tax benefits. The debate will likely center on how to maintain adequate state revenues while supporting lower-producing wells.