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 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.