HLS 17RS-759 ENGROSSED
2017 Regular Session
HOUSE BILL NO. 364
BY REPRESENTATIVE IVEY
TAX/SEVERANCE TAX: Provides with respect to the rate and base for the state tax on
certain natural resources severed from the soil or water
1 AN ACT
2To amend and reenact R.S. 47:633(7)(a) and (d)(introductory paragraph) and (8) and to
3 repeal R.S. 47:633(7)(d)(i) and (ii), relative to severance tax; to provide for certain
4 tax rates; to provide with respect to the exemption for certain production from a
5 horizontally drilled well; and to provide for related matters.
6Be it enacted by the Legislature of Louisiana:
7 Section 1. R.S. 47:633(7)(a) and (d)(introductory paragraph) and (8) are hereby
8amended and reenacted to read as follows:
9 §633. Rates of tax
10 The taxes on natural resources severed from the soil or water levied by R.S.
11 47:631 shall be predicated on the quantity or value of the products or resources
12 severed and shall be paid at the following rates:
13 * * *
14 (7)(a) On oil twelve and one-half eight percentum of its value at the time and
15 place of severance. Such value shall be the higher of (1) the gross receipts received
16 from the first purchaser, less charges for trucking, barging and pipeline fees, or (2)
17 the posted field price. In the absence of an arms length transaction or a posted field
18 price, the value shall be the severer's gross income from the property as determined
19 by R.S. 47:158(C).
20 * * *
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HB NO. 364
1 (d) There shall be an exemption from severance tax as provided in this
2 Subparagraph for production from any horizontally drilled well, or, on any
3 horizontally drilled recompletion well, from which production occurs on or after July
4 1, 2015. The exemption shall last for a period of twenty-four sixty months or until
5 payout of the well cost is achieved, whichever comes first, and shall be equal to one-
6 half of the tax rate imposed under this Section. For the purposes of this Section
7 "horizontal drilling" shall mean high angle directional drilling of bore holes with
8 fifty to three thousand plus feet of lateral penetration through productive reservoirs
9 and "horizontal recompletion" shall mean horizontal drilling in an existing well bore.
10 Payout of well cost shall be the cost of completing the well to the commencement
11 of production as determined by the Department of Natural Resources. The
12 provisions of this Subparagraph shall not apply to a well certified as a stripper or
13 incapable well.
14 * * *
15 (8) On distillate, condensate, or similar natural resources severed from the
16 soil or water either with oil or gas, twelve and one-half eight percentum of gross
17 value at the time and place of severance. For the levy of this tax, gross value shall
18 be as defined by R.S. 47:633(7)(a). However, natural gasoline, casinghead gasoline
19 and other natural gas liquids, including but not limited to ethane, methane, butane
20 or propane, all of which occur naturally or which are recovered through processing
21 gas after separation of oil, distillate, condensate, or similar natural resources shall not
22 be subject to the levy provided for in this Paragraph, but shall be subject to the levy
23 provided for in R.S. 47:633(9).
24 Section 2. R.S. 47:633(7)(d)(i) and (ii) are hereby repealed in their entirety.
25 Section 3. This Act shall become effective September 1, 2017.
26 Section 4. The provisions of this Act shall take effect on January 1, 2018, and only
27become operative if the proposed amendment of Article VII of the Constitution of Louisiana
28contained in the Act which originated as House Bill No. 356 of this 2017 Regular Session
29of the Legislature is adopted at a statewide election and becomes effective and if the Acts
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HB NO. 364
1which originated as House Bill Nos. 357, 358, 359, 360, 361, 362, and 363 of this 2017
2Regular Session of the Legislature are enacted and become effective.
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 364 Engrossed 2017 Regular Session Ivey
Abstract: Decreases the severance tax rate for oil, distillate, condensate, or similar natural
resources severed from the soil or water and extends the duration of the exemption
for production from a horizontally drilled well from 2 to 5 years, and specifies a
value for the exemption.
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.
The severance tax rate for distillate, condensate, or similar natural resources severed from
the soil or water either with oil or gas is 12.5% of value.
Proposed law changes present law by reducing the tax rate on oil from 12.5% to 8% of
value, and reducing the tax rate on distillate, condensate, or similar natural resources
severed from the soil or water either with oil or gas from 12.5% to 8% of value.
Present law establishes an exemption from severance tax for oil production from a
horizontally drilled well or horizontally drilled recompletion well that commences
production on or after July 1, 2015. The duration of the exemption is 24 months or until
payout, whichever occurs first. The amount of the exemption is based upon 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 months based on the average New York Mercantile Exchange prices per
barrel from the previous 12 months. The amount of the exemption for a horizontally drilled
well or recompletion well that produces oil shall be as follows:
(1)100% if the price of oil is at or below $70 per barrel.
(2)80% if the price is above $70 and at or below $80 per barrel.
(3)60% if the price is above $80 and at or below $90 per barrel.
(4)40% if the price is above $90 and at or below $100 per barrel.
(5)20% if the price is above $100 and at or below $110 per barrel.
(6)No exemption if the price of oil exceeds $110 per barrel.
Present law establishes an exemption from severance tax for natural gas production from a
horizontally drilled well or horizontally drilled recompletion well that commences
production on or after July 1, 2015. The amount of the exemption is based upon 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 horizontally drilled well or recompletion well that produces natural gas
shall be as follows:
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HB NO. 364
(1)100% if the price of natural gas is at or below $4.50 per million BTU.
(2)80% if the price is above $4.50 per million BTU and at or below $5.50 per million
BTU.
(3)60% if the price is above $5.50 per million BTU and at or below $6 per million
BTU.
(4)40% if the price is above $6 per million BTU and at or below $6.50 per million
BTU.
(5)20% if the price is above $6.50 per million BTU and at or below $7 per million
BTU.
(6)No exemption if the price of natural gas exceeds $7 per million BTU.
Proposed law changes present law by extending the duration of the exemption from 24
months or until payout to 60 months or until payout. The amount of the exemption is
changed from variable based on the price of the commodity to 50% of the tax rate.
Proposed law specifies that the exemption for horizontal drilling does not apply to a well
certified by the Dept. of Natural Resources as an incapable or stripper well.
Effective if and when the proposed amendment of Article VII of the Constitution of La.
contained in the Act which originated as House Bill No. 356 of this 2017 R.S. of the
Legislature is adopted at a statewide election and becomes effective and if and when House
Bill Nos. 357, 358, 359, 360, 361, 362, and 363 of this 2017 R.S. are enacted and become
effective.
(Amends R.S. 47:633(7)(a) and (d)(intro. para.) and (8); Repeals R.S. 47:633(7)(d)(i) and
(ii))
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the
original bill:
1. Provides that the exemption for horizontal drilling does not apply to a well
certified by the Dept. of Natural Resources as an incapable or stripper well.
2. Adds contingent effectiveness for proposed law if HB356, 357, 358, 359, 360,
361, 362, and 363 of this 2017 R.S. become effective.
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