HLS 13RS-1050 REENGROSSED
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Regular Session, 2013
HOUSE BILL NO. 474
BY REPRESENTATIVE STUART BISHOP
ENERGY/DRILLING: Provides relative to the exemption from severance tax for inactive
wells
AN ACT1
To amend and reenact R.S. 47:633(7)(c)(iv) and to repeal R.S. 47:633(9)(e)(vii), relative to2
severance tax on oil and gas; to provide relative to a reduced tax rate on oil and gas3
produced from a well classified as inactive; to provide for effectiveness; and to4
provide for related matters.5
Be it enacted by the Legislature of Louisiana:6
Section 1. R.S. 47:633(7)(c)(iv) is hereby amended and reenacted to read as follows:7
ยง633. Rates of tax8
The taxes on natural resources severed from the soil or water levied by R.S.9
47:631 shall be predicated on the quantity or value of the products or resources10
severed and shall be paid at the following rates:11
* * *12
(7)13
* * *14
(c)15
* * *16
(iv) Production from oil and gas wells which have been returned to service17
after being inactive for two or more years or having thirty days or less of production18
during the past two years shall be exempt from severance tax for a period of five19
years as provided in this Item.20 HLS 13RS-1050 REENGROSSED
HB NO. 474
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(aa) The provisions of this Subitem apply to a well for which an application1
was submitted before July 1, 2010, for purposes of the five year exemption2
application period which ended on June 30, 2010, hereinafter referred to in this3
Subitem as "initial exemption period". Beginning July 1, 2013, and for the period4
of time remaining in the initial exemption period, oil production shall be subject to5
a severance tax equal to three and one eighth percent of its value and gas production6
shall be subject to a severance tax equal to twenty-five percent of the rate established7
in Paragraph (9) of this Section. Upon expiration of an initial exemption period, an8
additional five year exemption period shall be allowed during which time oil9
production shall be subject to a severance tax of six and one quarter percent of its10
value and gas production shall be subject to a severance tax equal to fifty percent of11
the rate established in Paragraph (9) of this Section. The exemption shall be12
extended by the length of any inactivity of a well that has commenced production13
when such inactivity is caused by a force majeure.14
(bb) Beginning July 1, 2015, application may be made for certification of an15
inactive well for a ten year period in which oil production shall be subject to a16
severance tax of six and one quarter percent of its value and gas production shall be17
subject to a severance tax equal to fifty percent of the rate established in Paragraph18
(9) of this Section. for a period of five years when returned to service after being19
inactive for two or more years or having thirty days or less of production during the20
past two years. The exemption shall be extended by the length of any inactivity of21
a well that has commenced production when such inactivity is caused by a force22
majeure.23
(aa)(cc) To qualify for inactive well status for purposes of eligibility for a24
reduced severance tax rate as provided for in this Item, an application for a two-year25
inactive well certification shall be made to the Department of Natural Resources,26
before commencement of production, during the period beginning July 31, 1994 and27
ending June 30, 2000, for the period beginning July 1, 2002 and ending June 30,28
2006, and for the period beginning July 1, 2006 and ending June 30, 2010. Upon29 HLS 13RS-1050 REENGROSSED
HB NO. 474
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certification that a well is inactive, all production is exempt from severance tax for1
a period of five years from the date production begins or ninety days from the date2
of the application, whichever occurs first.3
(bb)(dd) If the severance tax is paid at the full rate provided by this Section4
before the Department of Natural Resources approves an application for two-year5
inactive well status, the operator is entitled to a credit against taxes imposed by this6
Section in an amount equal to the tax paid. To receive a credit, the operator must7
apply to the secretary of the Department of Revenue for the credit not later than the8
first anniversary after the date the Department of Natural Resources certifies that the9
well is a two-year inactive well.10
* * *11
Section 2. R.S. 47:633(9)(e)(vii) is hereby repealed in its entirety.12
Section 3.(A) This Act shall become effective on July 1, 2013; if vetoed by the13
governor and subsequently approved by the legislature, this Act shall become effective on14
July 1, 2013, or on the day following such approval by the legislature, whichever is later.15
(B) This Act shall take effect and become operative only if the proposed16
amendments of the Constitution of Louisiana contained in the Joint Resolutions which17
originated as House Bill Nos. 434, 435, and 436 of this 2013 Regular Session of the18
Legislature are concurred in by both houses of the legislature and House Bill Nos. 1, 437,19
456, 474, 571, 620, and 696 of this 2013 Regular Session of the Legislature are enacted into20
law.21
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Stuart Bishop HB No. 474
Abstract: Provides for reduced severance tax rates for oil and gas production from inactive
wells.
Present law levies a severance tax of 12.5% on oil produced in the state.
Present law levies a severance tax on natural gas produced in the state. The tax rate is set
each year by multiplying the natural gas severance tax base rate of 7 cents per MCF by the HLS 13RS-1050 REENGROSSED
HB NO. 474
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"gas base rate adjustment" which is determined by the secretary of the Dept. of Natural
Resources.
Present law provides for a 5-year exemption period during which oil and gas produced from
wells classified as inactive by the commissioner of conservation are exempt from severance
tax (hereinafter "initial exemption period").
Proposed law provides for a period of reduced severance tax rates for those inactive wells
which applied for inactive well status before July 1, 2010 and which are operating within an
initial exemption period. Beginning July 1, 2013 and for the period of time remaining in a
well's initial exemption period, the severance tax on oil shall be 3.125% of production value
and the tax on gas shall be 25% of the rate established by present law.
Proposed law provides that upon the expiration of an inactive well's initial exemption period,
there shall be an additional 5-year period during which time the severance tax on oil
produced from such wells shall be 3.125% of production value and the tax on gas shall be
25% of the rate established by present law.
Proposed law provides that after July 1, 2015, application may be made for certification of
an inactive well for a 10-year period in which oil production shall be subject to a severance
tax of 6.25% of its value and gas production shall be subject to a severance tax equal to 50%
of the rate established in present law.
Present law requires that inactive wells be certified by the Dept. of Natural Resources, and
that application for certification be made before commencement of production.
Proposed law retains present law.
Effective if the proposed amendments of the Const. of La. contained in the Joint Resolutions
which originated as HB Nos. 434, 435, and 436 of the 2013 R.S. are concurred in by both
houses of the legislature and HB Nos 1, 437, 456, 571, 620, 653, and 696 of the 2013 R.S.
are enacted into law.
Effective July 1, 2013.
(Amends R.S. 47:633(7)(c)(iv); Repeals R.S. 47:633(9)(e)(vii))
Summary of Amendments Adopted by House
House Floor Amendments to the original bill.
1. Deletes provisions for a 10-year severance tax exemption for oil production from
an inactive well.
2. Adds provisions for periods of reduced severance tax rates for those inactive
wells producing either oil or gas for which an application for inactive well
certification was submitted to the Dept. of Natural Resources before July 1,
2010.
3. Adds provisions for a 10-year period of reduced severance tax rates for inactive
wells producing oil or gas beginning July 1, 2015.
4. Adds effectiveness provisions, including contingencies regarding other
legislation.