Louisiana House Bill HB662

Louisiana 2021 Regular Session

• Introduced: 4/12/21
• Refer: 4/13/21
• Report Pass: 5/3/21
• Engrossed: 5/12/21
• Refer: 5/13/21
• Report Pass: 5/20/21

Caption

Exempts oil production of certain orphaned wells from severance tax (EG SEE FISC NOTE GF RV See Note)

Impact

The impact of this bill on state laws revolves around its modification of the existing severance tax framework. By exempting orphaned wells from these taxes, the legislation intends to encourage oil production from these often-neglected assets, thereby enhancing the state's resource exploitation strategy. Furthermore, requirements for operators include notifying the Department of Revenue once production commences and limitations on exemptions—they may apply for only one exemption per wellhead.

Summary

House Bill 662 aims to provide a severance tax exemption for oil produced from certain orphaned wells. This bill specifies that oil production from identified orphaned wells will not be subject to the standard severance tax rate of 12.5%. The exemption is applicable to production that commences between January 1, 2022, and December 31, 2024, and lasts for a maximum of 24 months or until the payout is achieved, whichever comes first. This legislative change seeks to incentivize the utilization of orphaned resources, potentially revitalizing dormant wells and stimulating local economies.

Sentiment

The general sentiment surrounding HB 662 appears to be largely supportive within the oil and gas industry, as stakeholders view this legislation as a way to reduce operational costs and promote production. However, concerns may arise regarding the potential for mismanagement of resources or the prioritization of profit over environmental considerations, importantly recognizing that violations under Statewide Order 29-B disqualify operators from receiving exemptions. Thus, while the prospects for economic benefit are evident, caution regarding regulatory compliance is emphasized.

Contention

Notable points of contention include the regulation of orphaned wells and the potential environmental implications of increased oil production. Some critics may argue that while the bill supports economic activity and resource utilization, it must also ensure that safety and environmental standards are maintained. This tension between economic incentivization and environmental stewardship could fuel ongoing debates about the appropriateness of tax exemptions in the fossil fuel sector.