HLS 15RS-780 ENGROSSED
2015 Regular Session
HOUSE BILL NO. 549
BY REPRESENTATIVE THIBAUT
TAX/SEVERANCE-EXEMPTI ON: Modifies exemptions, suspensions, and special rates
from July 1, 2015 to June 30, 2017
1 AN ACT
2To amend and reenact R.S. 47:633(7)(c)(iii)(introductory paragraph) and to enact R.S.
3 47:633(7)(d), relative to severance tax; to provide with respect to special tax
4 treatment for severance taxes on oil and natural gas; to provide with respect to the
5 tax on production from certain horizontally drilled wells; to provide for the amount
6 and duration of the exemption for certain horizontally drilled wells; to provide with
7 respect to the determination of the price of oil and natural gas for purposes of the
8 exemption; to provide for applicability; to provide for effectiveness; and to provide
9 for related matters.
10Be it enacted by the Legislature of Louisiana:
11 Section 1. R.S. 47:633(7)(c)(iii)(introductory paragraph) is hereby amended and
12reenacted and R.S. 47:633(7)(d) is hereby enacted to read as follows:
13 §633. Rates of tax
14 The taxes on natural resources severed from the soil or water levied by R.S.
15 47:631 shall be predicated on the quantity or value of the products or resources
16 severed and shall be paid at the following rates:
17 * * *
18 (7)
19 * * *
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HB NO. 549
1 (c)
2 * * *
3 (iii) All severance tax shall be suspended, for a period of twenty-four months
4 or until payout of the well cost is achieved, whichever comes first, on any
5 horizontally drilled well, or, on any horizontally drilled recompletion well, from
6 which production commences after July 31, 1994, and on or before December 31,
7 2015.
8 * * *
9 (d) There shall be an exemption from severance tax as provided in this
10 Subparagraph for production from any horizontally drilled well, or, on any
11 horizontally drilled recompletion well, from which production commences on or
12 after July 1, 2015. The exemption shall last for a period of twenty-four months or
13 until payout of the well cost is achieved, whichever comes first. For the purposes of
14 this Section "horizontal drilling" shall mean high angle directional drilling of bore
15 holes with fifty to three thousand plus feet of lateral penetration through productive
16 reservoirs and "horizontal recompletion" shall mean horizontal drilling in an existing
17 well bore. Payout of well cost shall be the cost of completing the well to the
18 commencement of production as determined by the Department of Natural
19 Resources.
20 (i) The amount of the exemption for a well that produces oil shall be based
21 upon the price of Crude Oil Spot Prices (nominal dollars and West Texas
22 Intermediate Spot) per barrel adopted by the Energy Information Administration
23 which is published in the Annual Energy Outlook report. The price per barrel for
24 any production that commences on or after July 1, 2015 through December 31, 2015,
25 shall be based on the price per barrel published in the April 2015 edition of the
26 Annual Energy Outlook report. The price per barrel for any production commencing
27 on and after January 1, 2016, for the ensuing twelve calendar months, shall be based
28 on the price per barrel published in the annual edition of the Annual Energy Outlook
29 report. The amount of the exemption shall be as follows:
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HB NO. 549
1 (aa) There shall be no tax if the price of oil is at or below seventy dollars per
2 barrel.
3 (bb) The tax rate shall be reduced by eighty percent if the price of oil is
4 above seventy dollars and at or below eighty dollars per barrel.
5 (cc) The tax rate shall be reduced by sixty percent if the price of oil is above
6 eighty dollars and at or below ninety dollars per barrel.
7 (dd) The tax rate shall be reduced by forty percent if the price of oil is above
8 ninety dollars and at or below one hundred dollars per barrel.
9 (ee) The tax rate shall be reduced by twenty percent if the price of oil is
10 above one hundred dollars and at or below one hundred ten dollars per barrel.
11 (ff) There shall be no exemption in effect if the price of oil exceeds one
12 hundred ten dollars per barrel.
13 (ii) The amount of the exemption for a well that produces natural gas shall
14 be based upon the Natural Gas Spot Price at Henry Hub (nominal dollars per million
15 BTU) adopted by the Energy Information Administration which is published in the
16 Annual Energy Outlook report. The price of natural gas for any production that
17 commences on or after July 1, 2015 through December 31, 2015, shall be based on
18 the price published in the April 2015 edition of the Annual Energy Outlook report.
19 The price for natural gas for any production commencing on and after January 1,
20 2016, for the ensuing twelve calendar months, shall be based on the price published
21 in the annual edition of the Annual Energy Outlook report. The amount of the
22 exemption shall be as follows:
23 (aa) There shall be no tax if the price of natural gas is at or below four
24 dollars and fifty cents per million BTU.
25 (bb) The tax rate shall be reduced by eighty percent if the price of natural gas
26 is above four dollars and fifty cents per million BTU and at or below five dollars and
27 fifty cents per million BTU.
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HB NO. 549
1 (cc) The tax rate shall be reduced by sixty percent if the price of natural gas
2 is above five dollars and fifty cents per million BTU and at or below six dollars per
3 million BTU.
4 (dd) The tax rate shall be reduced by forty percent if the price of natural gas
5 is above six dollars per million BTU and at or below six dollars and fifty cents per
6 million BTU.
7 (ee) The tax rate shall be reduced by twenty percent if the price of natural
8 gas is above six dollars and fifty cents per million BTU and at or below seven dollars
9 per million BTU.
10 (ff) There shall be no exemption in effect if the price of natural gas exceeds
11 seven dollars per million BTU.
12 Section 2. The provisions of this Act shall be applicable for production occurring
13on or after July 1, 2015, and on or before June 30, 2017.
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)]
HB 549 Engrossed 2015 Regular Session Thibaut
Abstract: Changes the severance tax "exemption" for production of oil and natural gas
from horizontally drilled wells and horizontally drilled recompletion wells by
changing the amount of the exemption from 100% to an amount based on the price
of oil and natural gas.
Present law imposes a tax on natural resources severed from the soil or water based upon
quantity or value of the products or resources severed. The severance tax rate for oil is
12.5% of value The severance tax rate for natural gas is a minimum of 7¢ per 1,000 cubic
feet but is subject to an annual rate adjustment based on the prior year's price of natural gas.
Present law suspends the levy of 100% of the severance tax on production from a
horizontally drilled well or horizontally drilled recompletion well for a period of 24 months
or until payout of the well cost is achieved, whichever comes first.
Proposed law, for purposes of the suspension of the severance tax on oil and natural gas,
defines "horizontal drilling" as high angle directional drilling of bore holes with 50 to 3,000
plus feet of lateral penetration through productive reservoirs and "horizontal recompletion"
shall mean horizontal drilling in an existing well bore.
Proposed law changes present law for the severance tax exemption on oil production from
horizontally drilled wells and recompletion wells commencing on or after July 1, 2015, by
changing the amount of the exemption from 100% to varying amounts based on the price of
Crude Oil Spot Prices (nominal dollars and West Texas Intermediate Spot) per barrel
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HB NO. 549
adopted by the Energy Information Administration (EIA) which is published in the Annual
Energy Outlook (AEO) report. The price per barrel for any production that commences on
or after July 1, 2015 through Dec. 31, 2015, shall be based on the price per barrel published
in the April 2015 edition of the AEO report. The price per barrel for any production
commencing on and after Jan. 1, 2016, for the ensuing 12 calendar months, shall be based
on the price per barrel published in the annual edition of the AEO report. The amount of the
exemption shall be as follows:
(1)No severance tax if the price of oil is at or below $70 per barrel.
(2)The tax rate shall be reduced by 80% if the price is above $70 and at or below $80
per barrel.
(3)The tax rate shall be reduced by 60% if the price is above $80 and at or below $90
dollars per barrel.
(4)The tax rate shall be reduced by 40% if the price is above $90 and at or below $100
per barrel.
(5)The tax rate shall be reduced by 20% if the price is above $100 and at or below $110
per barrel.
(6)There shall be no exemption if the price of oil exceeds $110 per barrel.
Proposed law changes present law for the suspension of severance taxes on natural gas
production from horizontally drilled wells and recompletion wells commencing on or after
July 1, 2015, by changing the amount of the exemption from 100% to varying amounts
based on the price on the Natural Gas Spot Price at Henry Hub (nominal dollars per million
BTU) adopted by the EIA published in the AEO report. The price of natural gas for any
production that commences on or after July 1, 2015 through Dec. 31, 2015, shall be based
on the price published in the April 2015 edition of the AEO report. The price for natural gas
for any production commencing on and after Jan. 1, 2016, for the ensuing 12 calendar
months, shall be based on the price published in the annual edition of the AEO report. The
amount of the exemption shall be as follows:
(1)No severance tax if the price of natural gas is at or below $4.50 per million BTU.
(2)The tax rate shall be reduced by 80% if the price is above $4.50 per million BTU and
at or below $5.50 per million BTU.
(3)The tax rate shall be reduced by 60% if the price is above $5.50 per million BTU and
at or below $6.00 per million BTU.
(4)The tax rate shall be reduced by 40% if the price is above $6.00 per million BTU and
at or below $6.50 per million BTU.
(5)The tax rate shall be reduced by 20% if the price is above $6.50 per million BTU and
at or below $7.00 per million BTU.
(6)There shall be no exemption if the price of natural gas exceeds $7.00 per million
BTU.
Applicable to production occurring on and after July 1, 2015 through June 30, 2017.
(Amends R.S. 47:633(7)(c)(iii)(intro. para.); Adds R.S. 47:633(7)(d))
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HB NO. 549
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the
original bill:
1. Delete the modifications to exemptions and suspensions and rate increases for
various types of mineral activity subject to severance taxes in favor of a rate
modification of the severance tax "exemption" for production of oil and natural
gas from horizontally drilled wells and horizontally drilled recompletion wells
by changing the amount of the exemption from 100% to an amount based on the
price of oil and natural gas.
2. Require the rate of the exemption on oil production from horizontally drilled
wells and recompletion wells to be based on the price of Crude Oil Spot Prices
(nominal dollars and West Texas Intermediate Spot) per barrel adopted by the
EIA which is published in the AEO report.
3. Require the rate of the suspension on natural gas production from horizontally
drilled wells and recompletion wells commencing to be based on the price on the
Natural Gas Spot Price at Henry Hub (nominal dollars per million BTU) adopted
by the EIA published in the AEO report.
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