RDCSB171 3945 2762
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)]
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 Dept.
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.
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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. Proposed law
is repealed effective June 30, 2031.
(Adds R.S. 30:88.2 and R.S. 47:633(7)(c)(iv)(cc); repeals 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.
Summary of Amendments Adopted by House
The Committee Amendments Proposed by House Committee on Ways and Means to the
engrossed bill:
1. Repeal provisions of proposed law effective June 30, 2031.
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