Louisiana House Bill HB658

Louisiana 2021 Regular Session

• Introduced: 4/12/21
• Refer: 4/13/21

Caption

Exempts oil production of newly completed wells that are undergoing or have undergone certain well enhancements (OR -$1,053,000 GF RV See Note)

Impact

The enactment of HB 658 is expected to have several impacts on state laws governing resource taxation. By temporarily exempting a portion of oil production from tax obligations, the bill is designed to encourage investment in well enhancements and, consequently, increase oil output. The financial implications include a projected reduction in revenue from severance taxes for the state, which may result in an estimated loss of over $1 million in general fund revenue. This bill is especially relevant for the oil industry as it seeks to stimulate growth during a period of fluctuating market conditions.

Summary

House Bill 658 aims to incentivize oil production from newly completed wells undergoing enhancements by providing a temporary exemption from the severance tax, which is normally imposed at a rate of 12.5%. This exemption applies specifically to production that occurs between January 1, 2022, and December 31, 2024, for the first 5,000 barrels produced following the completion of designated enhancements such as re-entries, workovers, sidetracks, or plugbacks. The bill outlines requirements for the exemption, emphasizing the need for operators to hold relevant permits from the Department of Natural Resources.

Sentiment

The sentiment surrounding HB 658 appears to favor its passage among industry stakeholders who view the exemption as a necessary step to bolster production and investment in oil drilling operations. Proponents argue that the temporary relief from severance tax will allow operators to enhance their wells more effectively, leading to increased production and economic benefits. However, there may also be concerns among legislators and public advocates about the potential long-term effects on state tax revenue and the implications for environmental oversight as production ramps up.

Contention

There are notable points of contention regarding HB 658, particularly relating to the balance between encouraging resource development and ensuring sustainable environmental practices. Critics may argue that with reduced tax incentives, there could be less regulatory scrutiny on wells undergoing enhancements, raising concerns about environmental degradation. Moreover, the bill stipulates that operators found to be in violation of conservation regulations will be ineligible for the tax exemption, which highlights a tension between promoting oil production and enforcing accountability within the sector.