HLS 23RS-575 ORIGINAL
2023 Regular Session
HOUSE BILL NO. 172
BY REPRESENTATIVE DEVILLIER
TAX/SEVERANCE TAX: Reduces the severance tax rate for oil over a certain period of
time and fixes the severance tax rate for oil produced from certain wells at the
current rate
1 AN ACT
2To amend and reenact R.S. 47:633(7)(a), (b), and (c)(i)(aa) and (ii)(aa) and (cc), relative to
3 severance tax; to reduce the severance tax rate on oil over a certain period of time;
4 to fix the severance tax rate on oil produced from certain wells at the current rate; to
5 provide for certain limitations; to provide for an effective date; and to provide for
6 related matters.
7Be it enacted by the Legislature of Louisiana:
8 Section 1. R.S. 47:633(7)(a), (b), and (c)(i)(aa) and (ii)(aa) and (cc) are hereby
9amended and reenacted to read as follows:
10 ยง633. Rates of tax
11 The taxes on natural resources severed from the soil or water levied by R.S.
12 47:631 shall be predicated on the quantity or value of the products or resources
13 severed and shall be paid at the following rates:
14 * * *
15 (7)(a)(i) On oil twelve and one-half percentum of its value at the time and
16 place of severance., at the following rate:
17 (aa) For taxable periods beginning on or after January 1, 2023, and before
18 July 1, 2024, twelve and one-half percent of its value at the time and place of
19 severance.
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HB NO. 172
1 (bb) For taxable periods beginning on or after July 1, 2024, and before July
2 1, 2025, twelve percent of its value at the time and place of severance.
3 (cc) For taxable periods beginning on or after July 1, 2025, and before July
4 1, 2026, eleven and one-half percent of its value at the time and place of severance.
5 (dd) For taxable periods beginning on or after July 1, 2026, and before July
6 1, 2027, eleven percent of its value at the time and place of severance.
7 (ee) For taxable periods beginning on or after July 1, 2027, and before July
8 1, 2028, ten and one-half percent of its value at the time and place of severance.
9 (ff) For taxable periods beginning on or after July 1, 2028, and before July
10 1, 2029, ten percent of its value at the time and place of severance.
11 (gg) For taxable periods beginning on or after July 1, 2029, and before July
12 1, 2030, nine and one-half percent of its value at the time and place of severance.
13 (hh) For taxable periods beginning on or after July 1, 2030, and before July
14 1, 2031, nine percent of its value at the time and place of severance.
15 (ii) For taxable periods beginning on or after July 1, 2031, eight and one-half
16 percent of its value at the time and place of severance.
17 (ii) The Such value shall be the higher of (1) the gross receipts received from
18 the first purchaser, less charges for trucking, barging and pipeline fees, or (2) the
19 posted field price. In the absence of an arms length transaction or a posted field
20 price, the value shall be the severer's gross income from the property as determined
21 by R.S. 47:158(C).
22 (b) On oil produced from a well classified by the commissioner of
23 conservation as an oil well, and determined by the collector of revenue that such well
24 is incapable of producing an average of more than twenty-five barrels of oil per
25 producing day during the entire taxable month, and which also produces at least fifty
26 percent salt water per day, the tax rate applicable to the oil severed from such well
27 shall be one-half of the rate set forth in Subparagraph (a) of this Paragraph six and
28 twenty-five hundreths percent of its value at the time and place of severance and
29 such well shall be defined, for severance tax purposes, as an incapable well, provided
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HB NO. 172
1 that such well has been certified by the Department of Revenue as incapable of such
2 production on or before the twenty-fifth day of the second month following the
3 month of production. Oil severed from a multiple well lease or property is not
4 subject to the reduced rate of tax provided for herein, unless all such wells are
5 certified as incapable.
6 (c)(i)(aa) On oil produced from a well classified by the commissioner of
7 conservation as an oil well, and certified by the Department of Revenue that such
8 well is incapable of producing an average of more than ten barrels of oil per
9 producing day during the entire taxable month, the tax rate applicable to the oil
10 severed from such well shall be one-quarter of the rate set forth in Subparagraph (a)
11 of this Paragraph three and one hundred twenty-five thousandths percent of its value
12 at the time and place of severance and such well shall be defined, for severance tax
13 purposes, as a stripper well, provided that such well has been certified by the
14 Department of Revenue as a stripper well on or before the twenty-fifth day of the
15 second month following the month of production. Once a well has been certified and
16 determined to be incapable of producing an average of more than ten barrels of oil
17 per producing day during an entire month, such stripper well shall remain certified
18 as a stripper well until the well produces an average of more than ten barrels of oil
19 per day during an entire calendar month.
20 * * *
21 (ii)(aa) On oil produced from a well in a stripper field classified by the
22 commissioner of conservation as a mining and horizontal drilling project which
23 utilizes gravity drainage to a collection point in a downhole operations room, the tax
24 rate applicable to the oil severed from such well shall be one-quarter of the rate set
25 forth in Subparagraph (a) of this Paragraph (7) three and one hundred twenty-five
26 thousandths percent of its value at the time and place of severance; provided that
27 such well has been classified by the commissioner as a mining and horizontal drilling
28 project before the lower rate is claimed on a tax return.
29 * * *
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HB NO. 172
1 (cc) The tax rate provided in Paragraph (ii)(aa) Subitem (aa) of this Item
2 shall be applicable only to the working interest and shall only apply until the
3 cumulative value of hydrocarbon production from the mining and horizontal drilling
4 project is equal to two and one-third times the total private investment, invested by
5 the working interest owners, in the project.
6 * * *
7 Section 2. This Act shall become effective upon signature by the governor or, if not
8signed by the governor, upon expiration of the time for bills to become law without signature
9by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If
10vetoed by the governor and subsequently approved by the legislature, this Act shall become
11effective 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 172 Original 2023 Regular Session DeVillier
Abstract: Reduces the severance tax rate on oil over an eight-year period from 12.5% to
8.5% of its value at the time and place of severance and fixes the severance tax rate
for oil produced from certain incapable and stripper wells at the current rate.
Present law provides for the levy of an excise tax on natural resources severed from the soil
or water, the rate for which is predicated on the quantity or value of the products or resources
severed.
Present law provides that the tax rate on oil is 12.5% of its value at the time and place of
severance. Provides that the value of the oil is the higher of the gross receipts received from
the first purchaser, less charges for trucking, barging and pipeline fees, or the posted field
price.
Proposed law reduces the tax rate on oil over an eight-year period from 12.5% as follows:
(1)For taxable periods beginning on or after July 1, 2024, and before July 1, 2025, to
12%.
(2)For taxable periods beginning on or after July 1, 2025, and before July 1, 2026, to
11.5%.
(3)For taxable periods beginning on or after July 1, 2026, and before July 1, 2027, to
11%.
(4)For taxable periods beginning on or after July 1, 2027, and before July 1, 2028, to
10.5%.
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HB NO. 172
(5)For taxable periods beginning on or after July 1, 2028, and before July 1, 2029, to
10%.
(6)For taxable periods beginning on or after July 1, 2029, and before July 1, 2030, to
9.5%.
(7)For taxable periods beginning on or after July 1, 2030, and before July 1, 2031, to
9%.
(8)For taxable periods beginning on or after July 1, 2031, to 8.5%.
Present law provides that oil produced from a well classified by the commissioner of
conservation (commissioner) as an oil well and determined by the Dept. of Revenue (DOR)
as a well that is incapable of producing an average of more than 25 barrels of oil per
producing day during the entire taxable month, and which also produces at least 50% salt
water per day is taxed at a rate equal to one half of the present rate for oil established in
present law (R.S. 47:633(7)(a) which equates to 6.25%. Further defines such a well for
severance tax purposes as an incapable well if the well has been certified by DOR as
incapable of production on or before the 25th day of the second month following the month
of production.
Proposed law changes present law by fixing the rate at 6.25% of the oil's value at the time
and place of severance.
Present law provides that oil produced from a well classified by the commissioner as an oil
well and certified by DOR that the well is incapable of producing an average of more than
10 barrels of oil per producing day during the entire taxable month is taxed at a rate equal
to one quarter of the present rate for oil established in present law (R.S. 47:633(7)(a) which
equates to 3.125%. Further defines such a well for severance tax purposes as a stripper well
if the well has been certified by DOR as a stripper well on or before the 25th day of the
second month following the month of production.
Proposed law changes present law by fixing the rate at 3.125% of the oil's value at the time
and place of severance.
Present law provides that oil produced from a well in a stripper field classified by the
commissioner as a mining and horizontal drilling project which utilizes gravity drainage to
a collection in a downhole operations room is taxed at a rate equal to one quarter of the
present rate for oil established in present law (R.S. 47:633(7)(a) which equates to 3.125%.
Further defines such a well for severance tax purposes as such if the well has been classified
by the commissioner as a mining and horizontal drilling project before the lower rate is
claimed on a tax return.
Proposed law changes present law by fixing the rate at 3.125% of the oil's value at the time
and place of severance.
Effective upon signature of governor or lapse of time for gubernatorial action.
(Amends R.S. 47:633(7)(a), (b), and (c)(i)(aa) and (ii)(aa) and (cc))
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