Louisiana House Bill HB683

Louisiana 2013 Regular Session

• Introduced: 4/16/13
• Refer: 4/17/13

Caption

Provides relative to severance tax

Impact

By amending the criteria for incapability in oil wells, HB 683 can have a significant impact on oil producers in Louisiana. Producers operating wells that previously fell short of the 25-barrel threshold may now qualify for tax relief if their output does not exceed 30 barrels. Additionally, the bill maintains the provision that suspends severance taxes on horizontally drilled wells for 24 months or until their production costs have been recouped. The inclusion of audited information regarding well costs also adds a layer of oversight that may affect stakeholders operationalizing new drilling sites.

Summary

House Bill 683, introduced by Representative Henry, seeks to amend the state’s severance tax laws specifically related to oil and natural gas production. The primary change proposed in this bill involves the eligibility criteria for certain tax exemptions associated with incapable wells and horizontally drilled wells. While it retains the general severance tax rates, it elevates the threshold defining an incapable well from producing 25 barrels of oil per day to 30 barrels per day, potentially expanding the number of wells eligible for reduced tax treatment under state law.

Sentiment

The sentiment surrounding HB 683 appears to be generally supportive among industry stakeholders and oil producers who advocate for tax relief as a means of promoting economic efficiency and enhanced production viability. However, there may be opposition from groups concerned about the potential fiscal implications if increased exemptions lead to decreased revenue from severance taxes, which are crucial for funding public services and infrastructure. Discussions around tax policy adjustments are invariably sensitive and tend to elicit varied reactions depending on one’s economic interests.

Contention

Notable points of contention surrounding the bill include the debate over the adequacy of the altered thresholds for incapable wells and the impact of increased exemptions on state revenue. Some lawmakers and advocacy groups may argue that the change is not only fiscally irresponsible but could also set a precedent for further tax breaks to the oil industry at the expense of public welfare. Furthermore, while some stakeholders appreciate the oversight mandated through the new auditing requirements for horizontally drilled wells, concerns remain about the broader economic implications for local communities reliant on severance tax revenues.