Louisiana House Bill HB256

Louisiana 2019 Regular Session

• Introduced: 3/27/19
• Refer: 3/27/19
• Refer: 4/8/19
• Report Pass: 4/23/19
• Engrossed: 4/30/19
• Refer: 5/1/19
• Report Pass: 5/13/19
• Refer: 5/14/19

Caption

Provides with respect to the rate and exemption for the severance tax on oil produced from incapable wells (RE2 -$2,500,000 GF RV See Note)

Impact

The passage of HB 256 is expected to have significant implications for the state's oil taxation structure. By providing a tax exemption under specified conditions, the bill aims to support struggling oil producers and stimulate production from incapable wells, which may otherwise be economically unfeasible to operate. This could potentially lead to more jobs and economic activity in regions where these wells are located. The bill reinforces the importance of the oil industry to Louisiana's economy while attempting to address the challenges faced by smaller operators during periods of low oil prices.

Summary

House Bill 256 introduces a severance tax exemption for oil produced from incapable wells in Louisiana, effective from January 1, 2020, until December 31, 2029. The bill specifically targets wells classified as incapable, which are those that produce an average of no more than 25 barrels of oil per day and yield at least 50% saltwater. The legislation proposes to exempt these wells from severance taxes when the average price of oil falls below $75 per barrel, responding to the economic pressures faced by operators of low-output wells. This measure acknowledges the financial realities within the oil sector, particularly in light of fluctuating oil prices.

Sentiment

The sentiment surrounding HB 256 appears largely supportive among lawmakers, as evidenced by the unanimous passage with 93 votes in favor and none against. Proponents argue that the bill helps preserve local jobs and sustain economic viability in the oil sector during challenging market conditions. Conversely, some critics might raise concerns over the long-term fiscal impacts of tax exemptions on state revenue and the equitable treatment of different sectors within natural resource taxation. The lack of opposition likely points to a consensus on the importance of the oil industry in Louisiana’s economy.

Contention

While the bill has garnered bipartisan support, concerns could arise regarding the implications of tax exemptions on public funding, particularly if the state relies heavily on severance tax revenues. Moreover, the criteria set for what constitutes an incapable well could lead to debates about compliance and enforcement. Ensuring that operators meet the standards necessary to qualify for exemption may require robust oversight from the Department of Revenue. Additionally, potential fluctuations in oil prices over the exemption period could introduce further contention regarding the sustainability and effectiveness of this tax policy.