Provides with respect to exempt severance tax on oil produced from stripper wells (Items #61 & 65) (OR -$6,796,000 GF RV See Note)
Impact
The bill will amend existing tax laws regarding natural resources by establishing stricter criteria for tax exemptions based on the value of oil produced. By providing an exemption specifically for stripper wells, which are generally less productive oil sources, it aims to alleviate the financial challenges faced by local oil producers during periods of fluctuating oil prices. This change reflects an effort to bolster the oil industry in Louisiana while ensuring that the state continues to collect taxes when oil prices are favorable. However, it is also crucial in safeguarding employment and economic stability in regions heavily dependent on oil extraction.
Summary
House Bill 8 is designed to provide a severance tax exemption for oil produced from stripper wells and classified stripper fields in Louisiana. This bill specifically suspends the severance tax when the price of oil falls below $75 per barrel, a provision that is set to last from January 1, 2021, through December 31, 2029. The legislation seeks to support smaller oil producers by mitigating financial burdens in times of low oil prices, thereby helping to sustain local economies that rely on oil production. To qualify for the exemption, the oil producers must submit timely reports confirming their wells’ average production does not exceed 10 barrels per day during a calendar month.
Sentiment
The sentiment towards HB 8 appears to be generally positive among advocates of the oil industry, with strong support from legislators who acknowledge the financial hurdles that smaller producers face, especially in volatile markets. Proponents view this bill as a necessary lifeline that enables local businesses to thrive and maintain jobs. Conversely, critics may argue it represents a misplaced prioritization of oil profits over broader environmental and fiscal considerations, and such tax exemptions could negatively impact state revenue in the long run.
Contention
One notable point of contention in discussions surrounding HB 8 involves its potential impact on state revenue, considering that the bill will allow for substantial tax exemptions during periods when oil prices dip. Critics argue that the long-term fiscal implications of this exemption could undermine public funds that support essential services. However, supporters emphasize that the stabilization of local economies through the support of stripper wells is vital, and the bill strikes a balance between economic growth and state revenue concerns.
Reduces the severance tax rate for oil over a certain period of time and fixes the severance tax rate for oil produced from certain wells at the current rate (OR DECREASE GF RV See Note)
Reduces the severance tax rate for oil over a certain period of time and specifies the severance tax rate for oil produced from certain wells (EG DECREASE GF RV See Note)
Reduces the rate of severance tax on oil produced from newly completed wells and provides relative to special rates on oil produced from certain limited-production wells (EN DECREASE GF RV See Note)
Reduces the severance tax rate for oil over a certain period of time and fixes the severance tax rate for oil produced from certain wells at the current rate (EG DECREASE GF RV See Note)
Reduces the severance tax rate for oil over a certain period of time, clarifies the severance tax rate for oil produced from certain incapable wells, and authorizes the reduction of the severance tax rate on natural gas (RE DECREASE GF RV See Note)