Louisiana House Bill HB661

Louisiana 2021 Regular Session

• Introduced: 4/12/21
• Refer: 4/13/21

Caption

Exempts oil production of certain newly drilled wells from severance tax (OR -$2,411,000 GF RV See Note)

Impact

The primary impact of HB 661 is the financial relief it provides to oil producers, incentivizing investment in new well drilling and potentially stimulating local economic activity. The bill limits the exemption to one per wellhead and specifies that it lasts for a maximum of twelve months or until the payout of well costs is achieved, whichever comes first. Additionally, the Department of Revenue is tasked with reporting the number and cost of exemptions claimed, providing transparency and oversight on the financial implications of the legislation. This approach balances the need for state revenue with the goal of encouraging investment in the oil sector.

Summary

House Bill 661 aims to exempt oil produced from certain newly drilled wells from severance tax for a limited period. Under existing Louisiana law, a severance tax at a rate of 12.5% is imposed on natural resources severed from the soil or water, including oil. The proposed legislation introduces an exemption for oil extracted from new wells, provided that production occurs between January 1, 2022, and December 31, 2024, with qualifications and stipulations regarding the duration of the exemption and notification to the Department of Revenue. This measure intends to benefit operators by reducing the tax burden during the initial production phase of freshly drilled wells.

Sentiment

The sentiments expressed regarding HB 661 appear to be largely positive among the proponents who emphasize the potential for economic growth and job creation in the oil sector. However, there may be concerns from those focused on environmental sustainability and the long-term fiscal implications for state taxes. Overall, the discussion may show a favorable view towards supporting the oil industry, reflecting a commitment to maintaining Louisiana's standing as a significant player in energy production, amidst balancing environmental considerations.

Contention

Notably, the bill includes provisions that disqualify operators who violate important state regulations from receiving the tax exemption, highlighting an attempt to maintain regulatory integrity. This aspect may foster contention, especially among those concerned about environmental regulations and the adherence of oil operators to state laws. Furthermore, the specific exclusion of horizontally drilled wells from the exemption opens up discussions about the differential treatment of drilling methods and equity in tax policy across different sectors of the oil industry.