HLS 161ES-266 ORIGINAL
2016 First Extraordinary Session
HOUSE BILL NO. 109
BY REPRESENTATIVE HUNTER
TAX/SEVERANCE-EXEMPTI ON: Repeals the severance tax exemptions for the
horizontal drilling of oil and natural gas
1 AN ACT
2To repeal R.S. 47:633(7)(d), relative to certain severance tax exemptions; to repeal the
3 severance tax exemptions for the horizontal drilling of oil and natural gas; and to
4 provide for an effective date.
5Be it enacted by the Legislature of Louisiana:
6 Section 1. R.S. 47:633(7)(d) is hereby repealed in its entirety.
7 Section 2. This Act shall become effective on April 1, 2016.
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 109 Original 2016 First Extraordinary Session Hunter
Abstract: Repeals the severance tax exemptions for the horizontal drilling of oil and
natural gas occurring from horizontally drilled wells and recompletion wells
commenced on or after July 1, 2015.
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, 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.
Present law, for purposes of the severance tax exemption on oil production occurring from
horizontally drilled wells and recompletion wells commenced on or after July 1, 2015,
provides for a severance tax exemption based on the price of oil as determined by the
secretary of the Dept. of Natural Resources on July 1
st
of each year for the ensuing 12
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HB NO. 109
months based on the average New York Mercantile Exchange prices per barrel from the
previous 12 months. The amount of the exemption for a horizontal well that produces oil
shall be as follows:
(1)No severance tax if the price of oil is at or below $70 per barrel.
(2)The exemption shall be 80% if the price is above $70 and at or below $80 per barrel.
(3)The exemption shall be 60% if the price is above $80 and at or below $90 dollars per
barrel.
(4)The exemption shall be 40% if the price is above $90 and at or below $100 per
barrel.
(5)The exemption shall be 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.
Present law for purposes of the severance tax exemption on natural gas production occurring
from horizontally drilled wells and recompletion wells commenced on or after July 1, 2015,
provides for a severance tax exemption based on the price of natural gas as determined by
the secretary of the Dept. of Natural Resources on July 1
st
of each year for the ensuing 12
months based on the average New York Mercantile Exchange prices per million BTU per
month from the previous 12 months. The amount of the exemption for a horizontal well that
produces gas 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 exemption shall be 80% if the price is above $4.50 per million BTU and at or
below $5.50 per million BTU.
(3)The exemption shall be 60% if the price is above $5.50 per million BTU and at or
below $6.00 per million BTU.
(4)The exemption shall be 40% if the price is above $6 per million BTU and at or below
$6.50 per million BTU.
(5)The exemption shall be 20% if the price is above $6.50 per million BTU and at or
below $7 per million BTU.
(6)There shall be no exemption if the price of natural gas exceeds $7.00 per million
BTU.
Proposed law repeals the present law severance tax exemptions on oil and natural gas
production occurring from horizontally drilled wells and recompletion wells commenced on
or after July 1, 2015.
Effective April 1, 2016.
(Repeals R.S. 47:633(7)(d))
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