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 Reengrossed 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 7ยข 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 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.
(Amends R.S. 47:633(7)(c)(iii)(intro. para.); Adds R.S. 47:633(7)(d)) 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.
The House Floor Amendments to the engrossed bill:
1. Clarify that the provisions of proposed law regarding the amount of the "exemption"
from severance tax for production of oil and natural gas from horizontally drilled wells
and horizontally drilled recompletion wells applies to production which commences on
or after July 1, 2015.
2. Change the applicability of proposed law from production occurring on or after July 1,
2015, and on or before June 30, 2017, to production occurring on or after July 1, 2015.