SLS 21RS-167 REENGROSSED
2021 Regular Session
SENATE BILL NO. 171
BY SENATOR ALLAIN
TAX EXEMPTIONS. Provides for severance tax exemptions and site-specific trust funds
for certain orphan wells. (gov sig)
1 AN ACT
2 To enact R.S. 30:88.2 and R.S. 47:633(7)(c)(iv)(cc), relative to an exemption from
3 severance tax on oil production from certain orphaned wells; to provide for payments
4 into site-specific trust accounts in an amount equal to the severance tax that would
5 otherwise be due; to provide for reimbursement of certain oilfield site restoration
6 costs; to provide for certain requirements and limitations; and to provide for related
7 matters.
8 Be it enacted by the Legislature of Louisiana:
9 Section 1. R.S. 30:88.2 is hereby enacted to read as follows:
10 §88.2. Orphan well rework program
11 A. Orphan wells. (1) For purposes of this Section, an orphan well shall
12 mean an oil well that is designated as part of an orphaned oilfield site and that
13 has had no reported production for a period of greater than twelve months
14 immediately prior to the production of oil to which this Section applies.
15 (2) The monies paid to the state treasury in accordance with R.S.
16 47:633(7)(c)(iv)(cc) derived from oil produced from an orphaned well as defined
17 in this Section shall be credited to the associated site-specific trust account.
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1 B. New production. In the event of new production from a formerly
2 orphaned well meeting the requirements of Paragraph (A)(1) of this Section, a
3 site-specific trust account shall be established to separately account for each
4 such site for the purpose of providing a source of funds for future site
5 restoration of that oilfield site when restoration of the oilfield site is required.
6 Once established, the site-specific trust account shall remain in effect until
7 completion of site restoration of the associated oilfield site.
8 C. Trust account monitoring. The assistant secretary shall monitor each
9 trust account to assure that it is being properly funded. The funds in each trust
10 account shall remain the property of the commission. If the site-specific trust
11 account is not funded through the payment of amounts equal to the severance
12 tax that would otherwise be due the state for a period of greater than six months
13 from the date of first production following designation of the well as part of an
14 orphaned oilfield site, the assistant secretary shall require financial security in
15 accordance with the office of conservation's rules and regulations.
16 D. Transfers of oilfield sites. When transfers of oilfield sites occur
17 subsequent to the formation of site-specific trust accounts pursuant to this
18 Section but before the end of the oilfield site's economic life, the balance of any
19 site-specific trust account at the time of transfer shall remain associated with
20 the oilfield site.
21 E. Unusable oilfield sites. For unusable oilfield sites, after site restoration
22 has been completed and approved by the assistant secretary, funds from a
23 site-specific trust account shall be disbursed as follows:
24 (1) If the site restoration has been completed by the operator of record
25 on file with the assistant secretary, the balance of the funds existing in the
26 site-specific trust account shall be remitted to that operator of record.
27 (2) If the site restoration has been completed using monies from the
28 Oilfield Site Restoration Fund and monies from the site-specific trust account,
29 any balance in the site-specific trust account shall be transferred into the
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1 Oilfield Site Restoration Fund for use on any oilfield site in accordance with this
2 Chapter.
3 (3) The site-specific trust account shall thereafter be closed.
4 F. Rules, regulations, and orders. The assistant secretary shall
5 promulgate, after notice and public hearings as provided in this Chapter, any
6 reasonable rules, regulations, and orders that are necessary to implement this
7 Section.
8 Section 2. R.S. 47:633(7)(c)(iv)(cc) is hereby enacted to read as follows:
9 §633. 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 (c) * * *
16 (iv) * * *
17 (cc) Notwithstanding any provision of law to the contrary, oil production
18 from any orphan well as defined by R.S. 30:88.2(A) that is undergoing or has
19 undergone well enhancements that required a Department of Natural Resources
20 permit, including but not limited to re-entries, workovers, or plugbacks, from
21 which production commences on or after October 1, 2021, shall be exempt from
22 the severance tax. To qualify for the exemption, an application for certification
23 shall be made to the Department of Natural Resources. Upon certification that
24 a well qualifies for the exemption, the operator shall remit to the Department
25 of Revenue an amount equal to the severance tax applicable to the well pursuant
26 to this Paragraph, which shall be credited to the associated site-specific trust
27 account provided for in R.S. 30:88.2 and shall be subject to all due date,
28 interest, and penalty provisions applicable to the oil severance tax.
29 * * *
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1 Section 3. This Act shall become effective upon signature by the governor or, if not
2 signed by the governor, upon expiration of the time for bills to become law without signature
3 by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
4 vetoed by the governor and subsequently approved by the legislature, this Act shall become
5 effective on the day following such approval.
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Leonore Heavey.
DIGEST
SB 171 Reengrossed 2021 Regular Session Allain
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.
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.
Present law provides for reduced rates of oil severance tax for inactive wells at the rates of
six percent for wells that have been inactive for 24 or more months and 3% for wells that
have been inactive for 60 months or more.
Proposed law provides beginning Oct. 1, 2020, oil produced from any well that has been
certified as an orphaned well and has been orphaned for 12 months or more and that is
undergoing or has undergone well enhancements that required a Dept. of Natural Resources
permit such as a re-entry, workover, or plug back, shall be exempt from severance tax, when
production occurs on or after Oct. 1, 2020.
Proposed law defines "orphan well" as an oil well that is designated as part of an orphaned
oilfield site and that has had no reported production for a period of greater than twelve
months immediately prior to the production of oil to which proposed law applies.
Proposed law requires an operator to submit an application for the exemption to the
Department of Natural Resources and further provides that the exemption does not begin
until the well is certified.
Proposed law requires the operator to remit an amount equal to the severance tax that would
otherwise be due on the well to the Dept. of Revenue, which shall be credited to the
associated site-specific trust account provided for in proposed law.
Proposed law establishes site-specific trust accounts to separately account for each such site
for the purpose of providing a source of funds for site restoration of that oilfield site.
Proposed law requires the Dept. of Natural Resources to monitor each trust account to assure
that it is funded, and authorizes the secretary to require security if an account is not funded
through the payment of amounts equal to the severance tax that would otherwise be due the
state for a period of greater than six months.
Proposed law provides that the site-specific trust fund will remain associated with the site
if the site is transferred after the formation of a site-specific trust account.
Proposed law provides that after site restoration has been completed and approved, if the
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only source of funds used in the site restoration was the site-specific trust account, that any
funds remaining in the account will be transferred to the operator.
Proposed law provides that after site restoration has been completed and approved, if the site
restoration was completed using funds from the Oilfield Site Restoration Fund and the
site-specific trust account that any funds remaining in the account will be transferred to the
Oilfield Site Restoration Fund.
Proposed law requires a site-specific trust fund to be closed after the site restoration is
completed and monies from the account are disbursed.
Proposed law authorizes the Dept. of Natural Resources to promulgate rules considered
necessary for the administration of proposed law.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Adds R.S. 30:88.2 and R.S. 47:633(7)(c)(iv)(cc))
Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Revenue and Fiscal
Affairs to the original bill
1. Provides for changes to the definition of orphan well.
2. Provides for collection of deposits by the Department of Revenue.
Senate Floor Amendments to engrossed bill
1. Conforms the severance tax exemption to the 12-month orphan designation
in the site specific trust fund.
2. Requires orphan certification by Department of Natural Resources.
3. Makes technical changes.
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