HLS 21RS-194 ORIGINAL
2021 Regular Session
HOUSE BILL NO. 57
BY REPRESENTATIVES COUSSAN AND DEVILLIER
TAX/SEVERANCE-EXEMPTI ON: Exempts oil production of certain oil wells from
severance tax
1 AN ACT
2To enact R.S. 47:633(7)(e), relative to certain severance tax exemptions; to provide for tax
3 exemptions on oil produced from certain orphaned, newly drilled, and newly
4 enhanced wells; to provide for the amount of the exemption; to provide for
5 applicability; to provide for definitions; to provide for effectiveness; to provide for
6 certain requirements and limitations; and to provide for related matters.
7Be it enacted by the Legislature of Louisiana:
8 Section 1. R.S. 47:633(7)(e) is hereby enacted to read as follows:
9 ยง633. Rates of tax
10 The taxes on natural resources severed from the soil or water levied by R.S.
11 47:631 shall be predicated on the quantity or value of the products or resources
12 severed and shall be paid at the following rates:
13 * * *
14 (7)
15 * * *
16 (e)(i) There shall be an exemption from the severance tax levied in this Part
17 on oil production from the following when production commences on or after
18 January 1, 2022, and on or before December 31, 2024:
19 (aa) An orphaned well.
20 (bb) A newly drilled well.
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HB NO. 57
1 (cc) A newly completed well that is undergoing or has undergone well
2 enhancements that required a Department of Natural Resources permit, including but
3 not limited to re-entries, workovers, or plugbacks.
4 (ii)(aa) The exemption for an orphaned well shall last for a period of twenty-
5 four months or until payout of the well cost is achieved, whichever occurs first.
6 (bb) The exemption for a newly drilled well shall last for a period of twelve
7 months or until payout of the well cost is achieved, whichever occurs first.
8 (cc) The exemption for a newly completed well that is undergoing or has
9 undergone well enhancements shall last for a period of six months or until payout of
10 the well cost is achieved, whichever occurs first.
11 (dd) For purposes of this Subparagraph, the exemption period shall begin the
12 first day of the month after the operator notifies the Department of Revenue that new
13 or post enhancement production has commenced. Notification shall be in a form
14 approved by the secretary of the Department of Revenue.
15 (ee) There shall be no more than one exemption authorized pursuant to this
16 Subparagraph for any wellhead.
17 (ff) No later than March 1, 2024, the Department of Revenue shall report the
18 number and cost of exemptions claimed pursuant to this Subparagraph by well
19 category and the Department of Natural Resources, office of conservation, shall
20 report the number of orphan wells plugged to the House Committee on Ways and
21 Means and the Senate Committee on Revenue and Fiscal Affairs.
22 (gg) An operator that has been found to be in violation of Statewide Order
23 29-B, LAC 43:XIX.Chapter 1 through 6, shall not be eligible for the exemption
24 authorized pursuant to this Subparagraph if the office of conservation is authorized
25 to withhold a permit application from the operator pursuant to R.S. 30:94.
26 (iii)(aa) Payout of well cost occurs when gross revenue from the well, less
27 royalties and operating costs directly attributable to the well, equals the well cost.
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HB NO. 57
1 (bb) For the purposes of this Subparagraph, well costs shall equal the cost
2 of completing the well to the commencement of production or the cost of well
3 enhancements, as determined by the Department of Natural Resources.
4 (cc) For the purposes of this Subparagraph, operating costs shall be limited
5 to those costs directly attributable to the operation of the exempt well, including but
6 not limited to direct materials, supplies, fuel, direct labor, contract labor or services,
7 repairs, maintenance, property taxes, insurance, depreciation, and any other costs that
8 can be directly attributed to the operation of the well. Where applicable, the
9 calculation of such costs shall begin from the date that the Department of Natural
10 Resources permitted operation or enhancement is complete and production is
11 established. Operating costs shall not include any costs that were included in the
12 well cost approved by the office of conservation.
13 (iv) Interest on a refund of severance tax to an operator whose well qualifies
14 for the exemption provided in this Subparagraph shall be paid in accordance with
15 R.S. 47:1624(A)(2).
16 Section 2. This Act shall become effective upon signature by the governor or, if not
17signed by the governor, upon expiration of the time for bills to become law without signature
18by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
19vetoed by the governor and subsequently approved by the legislature, this Act shall become
20effective on the day following such approval.
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 57 Original 2021 Regular Session Coussan
Abstract: Exempts oil produced from orphaned wells, newly drilled wells, or newly
completed wells that are undergoing or have undergone well enhancements including
but not limited to re-entries, workovers, or plugbacks from certain severance taxes
under certain circumstances.
Present law imposes a tax on natural resources severed from the soil or water based upon
quantity or value of the products or resources severed.
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HB NO. 57
Present law establishes a severance tax on oil at a rate of 12.5% of its value at the time and
place of severance. The value is the higher of: (1) gross receipts received from the first
purchaser, less charges for trucking, barging and pipeline fees, or (2) the posted field price.
Proposed law creates an exemption for oil produced from any orphaned well, newly drilled
well, or newly completed well that is undergoing or has undergone well enhancements that
require a Dept. of Natural Resources permit such as re-entries, workovers or plugbacks,
when production occurs on or after Jan. 1, 2022, and on or before Dec. 31, 2024.
Proposed law provides that the exemption for an orphaned well lasts for a period of 24
months or until payout is achieved, whichever occurs first.
Proposed law provides that the exemption for a newly drilled well lasts for a period of 12
months or until payout is achieved, whichever occurs first.
Proposed law provides that the exemption for a newly completed well that is undergoing or
has undergone well enhancements lasts for a period of six months or until payout is
achieved, whichever occurs first.
Proposed law provides the exemption period begins the first day of the month after the
operator notifies the Dept. of Revenue that new or post enhancement production has
commenced. Proposed law also provides that there may be no more than one exemption per
wellhead.
Proposed law requires, no later than March 1, 2024, the Dept. of Revenue to report the
number and cost of exemptions claimed by well category and the Dept. of Natural Resources
to report the number of orphan wells plugged to the House Committee on Ways and Means
and the Senate Committee on Revenue and Fiscal Affairs.
Proposed law prohibits an operator in violation of Statewide Order 29-B from being eligible
for the exemption if the office of conservation is authorized to withhold a permit application
from the operator pursuant to present law.
Proposed law defines "well costs" as the cost of completing the well to the commencement
of production or the cost of well enhancements, as determined by the Dept. of Natural
Resources.
Proposed law defines "operating costs" as costs directly attributable to the operation of the
exempt well, including but not limited to direct materials, supplies, fuel, direct labor,
contract labor or services, repairs, maintenance, property taxes, insurance, depreciation, and
any other costs that could be directly attributed to the well.
Proposed law provides that the calculation of operating costs begins from the date that the
Dept. of Natural Resources permitted operation or the date the enhancement was completed
and production was established. Operating costs exclude costs included in the well cost.
Proposed law requires the interest on a refund of severance tax to an operator whose well
qualified for this exemption be paid in accordance with present law (R.S. 47:1624(A)(2)).
Effective upon signature of governor or lapse of time for gubernatorial action.
(Adds R.S. 47:633(7)(e))
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