Constitutional amendment to repeal severance taxes upon oil and gas and to allow the levy of a tax upon hydrocarbon processing and to require a dedication of the first use of such taxes to replace constitutional dedications of severance tax and to require the distribution of the remainder for state highways or bridges, the Coastal Protection and Restoration Fund, and to or for the use of schools, colleges and universities, and other post secondary education institutions. (2/3-CA13sl(A)) (EG INCREASE SD RV See Note)
The proposed amendment is expected to significantly shift state revenue collection regarding natural resources, moving away from traditional severance taxes towards a processing tax model. If enacted, this could impact funding dedicated to local governments that heavily rely on severance tax revenues. The bill delineates specific allocations for the revenue generated by the new tax, ensuring that one-third goes to the Department of Transportation for infrastructure, another third to the Coastal Protection and Restoration Fund, and the final third directed to educational institutions. This new redistribution model aims to align funding with essential service areas.
Senate Bill 432 aims to amend the Louisiana Constitution by repealing the severance tax on oil and gas in favor of a new hydrocarbon processing tax. This bill would introduce a framework where revenues from hydrocarbon processing would be allocated to replace the revenues previously generated from severance taxes. Specifically, the revenue would be distributed to support transportation infrastructure, restoration of coastal areas, and educational institutions, which underscores the bill’s intent to balance fiscal policies while supporting critical state needs.
Overall sentiment around SB 432 is mixed, with some stakeholders viewing the repeal of the severance tax as a necessary step towards modernizing Louisiana's approach to taxing hydrocarbon resources. Advocates argue this change could stabilize and diversify state revenues. Conversely, opponents express concern over the potential loss of existing funding mechanisms that support local parishes, fearing that the proposed hydrocarbon processing tax may not generate equivalent revenue compared to the severance tax without adjusting rates appropriately.
Notably, one point of contention is the certainty of funding levels for local governments and conservation efforts after the switch from severance taxes to a hydrocarbon processing tax. Critics worry that the new tax may not yield sufficient revenue, especially given fluctuations in oil and gas markets. Additionally, the original constitutional framework provides specific protections under the severance tax, and transitioning to a new model raises questions about the adequacy of the proposed framework to ensure that critical areas such as education and infrastructure continue to receive necessary funding.