GREEN SHEET REDIGEST
HB 461 2017 Regular Session Bishop
(KEYWORD, SUMMARY, AND DIGEST as amended by Senate committee
amendments)
TAX/SEVERANCE-EXEMP TION: Provides for severance tax exemptions for certain
inactive and orphan wells
DIGEST
Present law authorizes a five year exemption from severance tax for production from oil and
gas wells that are returned to service after being inactive for two or more years or having
thirty days or less of production during the past two years (inactive well), effective July 1,
2006, through June 30, 2010.
Present law provides for a severance tax rate on oil and gas production of 12%.
Proposed law changes present law by changing the incentive for production from an inactive
well from a five year exemption to a 50% rate reduction for 10 years, and by establishing a
new effective period beginning July 1, 2018, through June 30, 2023.
Proposed law establishes an incentive for production from a well with orphan well
designation for at least 60 months. Production would be taxed at 75% of the normal rate for
10 years, effective for the period from July 1, 2018, through June 30, 2023.
Proposed law provides that to qualify for the reduced orphan and inactive well tax rate that
the oil and gas production be produced within the same producing interval or within 100 feet
above or below the producing interval that the well produced from before being inactive or
designated as an orphan well.
Proposed law requires the Department of Revenue to notify the commissioner of
conservation to cease certification of new inactive and orphan well for the remainder of the
fiscal year if the severance tax paid at the reduced orphan and inactive rate reaches $15
million in any fiscal year.
(Amends R.S. 47:633(7)(c)(iv))
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the
original bill:
1. Add a limit on the duration of the exemptions, July 1, 2018, through June 30,
2022.
2. Add technical changes regarding administration.
The House Floor Amendments to the engrossed bill:
1. Change the expiration date from June 30, 2022, to June 30, 2023.
2. Add technical changes clarifying that the incentive is a special rate.
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Prepared by Leonore F. Heavey. Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Revenue and Fiscal Affairs
to the reengrossed bill
1. Adds language clarifying the qualifications an orphan or inactive well must meet
to be eligible for the reduced tax rate.
2. Adds requirement that the Department of Revenue notify the commissioner of
conservation to stop new inactive and orphan well certifications if the severance
tax paid at the reduced rate reaches $15 million in any fiscal year.
3. Makes technical changes.
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Prepared by Leonore F. Heavey.