Louisiana House Bill HB26

Louisiana 2021 Regular Session

• Introduced: 2/24/21
• Refer: 2/24/21
• Refer: 4/12/21
• Report Pass: 4/26/21
• Engrossed: 5/3/21
• Refer: 5/4/21
• Report Pass: 5/20/21
• Enrolled: 6/8/21
• Vetoed: 6/29/21

Caption

Provides with respect to the severance tax exemption for stripper wells (EN NO IMPACT GF RV See Note)

Impact

The revisions proposed in HB 26 could have significant implications for state revenue and the oil production industry in Louisiana. By raising the exemption level, the bill intends to support stripper well operators, potentially revitalizing marginal oil production operations. This could lead to economic benefits in terms of job creation and increased local production. However, critics are likely to argue that this could reduce state tax revenue derived from oil production in the long term, especially if the price of crude oil does not consistently surpass the new exemption threshold.

Summary

House Bill 26 proposes changes to the severance tax exemptions applicable to crude oil produced from certified stripper wells. Specifically, it amends the existing law to increase the threshold value that determines when oil qualifies for tax exemption from twenty to thirty-five dollars per barrel. This adjustment aims to provide further financial relief to operators of stripper wells, which typically extract small amounts of oil from aging fields deemed economically marginal under current taxation structures.

Sentiment

Responses to HB 26 reflect a mix of optimism and concern. Supporters highlight the potential for job retention and economic stability within the stripper well sector, viewing the measure as a necessary adjustment to adapt to current market conditions. Conversely, opponents may express worries about the long-term fiscal impact of the raised exemption ceiling, fearing that it may set a precedent for further reductions in state tax revenue from natural resources.

Contention

Debate around HB 26 is likely to center on balancing economic support for oil producers with the need to maintain adequate funding for state services. Some legislators may argue that while supporting the oil industry is crucial, it should not come at the expense of public services financed by severance taxes. As such, the discussion may evoke broader themes regarding economic diversification and sustainability for Louisiana's economy, particularly in the face of fluctuating oil prices.