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 506 Engrossed 2020 Regular Session DeVillier
Abstract: Reduces the severance tax rate on oil over an eight-year period from 12.5% to 8.5% of
its value at the time and place of severance, clarifies the severance tax rate for oil produced
from certain incapable wells, and authorizes further reductions to the severance tax rate for
oil and natural gas if certain conditions are met.
Present law provides for the levy of an excise tax on natural resources severed from the soil or water,
the rate for which shall be predicated on the quantity or value of the products or resources severed.
Present law provides that the tax rate on oil is 12.5% of its value at the time and place of severance.
The value of the oil shall be the higher of the gross receipts received from the first purchaser, less
charges for trucking, barging and pipeline fees, or the posted field price.
Proposed law reduces the tax rate on oil over an eight-year period from 12.5% as follows:
(1)For taxable periods beginning on or after July 1, 2021, and before July 1, 2022, to 12%.
(2)For taxable periods beginning on or after July 1, 2022, and before July 1, 2023, to 11.5%.
(3)For taxable periods beginning on or after July 1, 2023, and before July 1, 2024, to 11%.
(4)For taxable periods beginning on or after July 1, 2024, and before July 1, 2025, to 10.5%.
(5)For taxable periods beginning on or after July 1, 2025, and before July 1, 2026, to 10%.
(6)For taxable periods beginning on or after July 1, 2026, and before July 1, 2027, to 9.5%.
(7)For taxable periods beginning on or after July 1, 2027, and before July 1, 2028, to 9%.
(8)For taxable periods beginning on or after July 1, 2028, to 8.5%.
Proposed law authorizes the reduction of the severance tax rate for oil from 12.5% to 2% during the
period of July 1, 2020, through June 30, 2021, if the price of oil falls below $30 per barrel at any
time during that period. The 2% severance tax rate shall be applicable only when the price of oil
falls below $30 per barrel.
Present law provides for a reduced severance tax rate of 6.25% for oil produced from a well classified by the commissioner of conservation as an oil well, and determined by the Dept. of
Revenue (DOR) that the well is incapable of producing an average of more than 25 barrels of oil per
producing day during the entire taxable month, and which also produces at least 50% salt water per
day. Further requires such a well to be defined, for severance tax purposes, as an incapable well,
provided that the well has been certified by DOR as incapable of production on or before the 25th
day of the second month following the month of production.
Proposed law retains present law.
Present law provides for a reduced severance tax rate of 3.125% for oil produced from a well
classified by the commissioner of conservation as an oil well, and certified by DOR that the well is
incapable of producing an average of more than 10 barrels of oil per producing day during the entire
taxable month. Further requires such a well to be defined, for severance tax purposes, as a stripper
well, provided that the well has been certified by DOR as a stripper well on or before the 25th day
of the second month following the month of production.
Proposed law retains present law.
Present law provides that the rate of the severance tax levied on natural gas shall be seven cents per
thousand cubic feet; however, this rate shall be annually adjusted on July 1
st
for the ensuing 12
calendar months in accordance with the gas base rate adjustment which is determined by the
secretary of the Dept. of Natural Resources. Present law prohibits the severance tax rate to be less
than seven cents per thousand cubic feet.
Proposed law authorizes a narrow exception to the prohibition of the severance tax rate on
natural gas to be less than seven cents per thousand cubic feet during the period of July 1, 2020,
through June 30, 2021. During this period, if the price of natural gas falls below $1.90 per thousand
cubic feet, the rate of the tax for natural gas shall be reduced by 80%. This reduced rate shall be
applicable only when the price of natural gas falls below $1.90 per thousand cubic feet.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:633(7)(a), (b), and (c)(i)(aa) and (9)(a)(ii) and (d)(i))
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the original
bill:
1. Specify that the date ranges for the graduated reduction in the severance tax rate for oil
refer to taxable periods.
2. Authorize the reduction in the severance tax rate for oil to 2% of its value at the time and
place of severance if the price of oil falls below $30 per barrel at any time from July 1,
2020, through June 30, 2021. This 2% severance tax rate shall be applicable only during the time that the price of oil falls below $30 per barrel.
3. Authorize an 80% reduction in the severance tax rate for natural gas if the price of
natural gas falls below $1.90 per thousand cubic feet at any time from July 1, 2020,
through June 30, 2021. This 80% severance tax rate reduction shall be applicable only
during the time that the price of natural gas falls below $1.90 per thousand cubic feet.