Louisiana House Bill HB101

Louisiana 2015 Regular Session

• Introduced: 3/13/15
• Refer: 3/13/15
• Refer: 4/13/15

Caption

Reduces the severance tax exemption for certain horizontally drilled wells

Impact

The implications of HB 101 are considerable, particularly for the oil and gas industry in the state. By limiting the severance tax exemption, the bill may align state tax revenue with the economic benefits of oil and gas production. This change may lead to increased tax contributions from energy companies, which could subsequently be invested into state services and infrastructure. On the other hand, industry stakeholders may argue that this reduction could deter new investment in drilling activities or influence operational decisions in an already volatile market.

Summary

House Bill 101 introduces significant changes to the severance tax exemption applicable to oil and natural gas production from horizontally drilled wells and horizontally drilled recompletion wells. Specifically, the bill reduces the existing exemption period from 100% to 75%, meaning entities will be subject to a tax rate of 25% of the regular severance tax once the exemption period concludes or after the payout of well costs is achieved. This alteration aims to secure more tax revenue for the state while still promoting drilling activities, albeit at a reduced incentive level.

Sentiment

General sentiment regarding HB 101 appears divided. Proponents of the bill endorse it as a necessary measure to ensure fair taxation of the energy sector, suggesting that the previous 100% exemption could be excessively generous to drilling companies. However, critics express concern that such legislative changes might hamper future investments in the energy sector and ultimately constrict job growth within the industry. The discussion highlights the ongoing tension between ensuring adequate state funding and maintaining a business-friendly environment for energy producers.

Contention

Notable points of contention surrounding HB 101 focus on the balance between taxation policy and economic competitiveness. Advocates argue that reducing the severance tax exemption is a step toward establishing a fairer tax framework, while detractors caution against potential negative impacts on the local economy. The bill may also face opposition from those who argue that the oil and gas industry is already heavily taxed and that any further taxation could stifle growth in an essential sector of the state's economy.