Louisiana House Bill HB57

Louisiana 2021 Regular Session

• Introduced: 3/4/21
• Refer: 3/4/21
• Refer: 4/12/21

Caption

Exempts oil production of certain oil wells from severance tax (OR -$3,724,000 GF RV See Note)

Impact

The enactment of this bill is expected to have a significant impact on state laws governing oil and gas revenues. By exempting certain wells from severance taxes, the bill aims to incentivize the production of oil from wells that have previously been idle or underperforming. Economically, the bill can potentially lead to increased oil production, revitalization of orphaned wells, and overall growth in the local energy sector, which could provide additional job opportunities and increase revenue for the state in the long term.

Summary

House Bill 57 aims to provide tax exemptions on oil production from orphaned wells, newly drilled wells, and newly completed wells undergoing well enhancements. The bill specifies that these exemptions from severance taxes are applicable under certain conditions and will last for defined periods depending on the type of well involved. For instance, an exemption for an orphaned well will last for 24 months or until the payout of well costs, while exemptions for newly drilled and enhanced wells will last for 12 and 6 months, respectively.

Sentiment

The sentiment surrounding HB 57 appears to be cautiously optimistic among industry stakeholders. Proponents argue that easing the tax burden on these well types is necessary to stimulate much-needed investment in the state’s oil and gas sector, especially considering the substantial costs associated with well enhancements and rejuvenation efforts. However, some concern has been voiced regarding the long-term implications of such tax exemptions on state revenue, particularly given the extent to which the state relies on severance tax income.

Contention

Notable points of contention regarding the bill include concerns about potential misuse of the tax exemptions and the impact on state revenue. Questions have been raised about the efficiency of the reporting requirements placed on the Department of Revenue and the Department of Natural Resources, as well as the provisions in place to ensure that only compliant operators benefit from these exemptions. Additionally, there are apprehensions that the exemptions may not produce the anticipated economic gains and could simply serve to improve the profitability of certain operators without substantive overall benefits to the state.