(The Center Square) — The Senate Revenue and Fiscal affairs committee considered various bills that would restructure Louisiana’s severance tax.
Each bill did pass without objection, but they all saw healthy debate.
Rep. Lawrence Bagley’s House Bill 294 would allow for parishes to see a greater share of the severance revenue for wells producing in their parish.
Current law caps a parishes share of the state severance tax at $850,000, though law also allows accounts for inflation. With the cap and the inflation provision, parishes are remitted about $1.3 million for their share of severance taxes. The Stonewall Republican’s bill would remove the cap, allowing parishes to collect 20% of all production in the parish.
DeSoto Parish Administrator Michael Norton worried that the current status quo stiffs locals. Sen. Adam Bass, R-Bossier City, agreed that locals ought to receive a more equitable share.
“There’s no other way to put it: We’ve been given the short end of the stick since 2002,” Norton said. “We’ve received back for approximately $17 million out of nearly $1 billion that has been sent to the state since 2002.”
There was $890 million in severance taxes collected for the 2022 fiscal year, according to the Louisiana Department of Revenue.
Rep. Brett Geymann, R-Lake Charles, introduced two bills which would trade a decrease in the severance tax rate on oil for a limit on tax exemptions for the severance of natural gas.
“The motivation is to get the oil and gas industry booming again,” said Geymann, adding that currently Louisiana’s severance tax structure is uncompetitive and keeps industry away from the state.
HB600 would reduce the severance tax on oil from 12.5% to 6.5%. Currently, Louisiana has the highest rate in the nation, according to Geymann.
Another bill, HB495 would limit an exemption for newly completed natural gas wells. Geymann agreed to combine the two.
“In the end its not going to effect the gas much at all, but will incentivize the oil side,” said Geymann.
Geymann is moving to shorten the duration of a key severance tax exemption for natural gas produced from newly completed horizontal wells. Under current law, gas producers receive a tax break lasting up to 24 months — or until they recover their drilling costs, whichever comes first.
Starting July 1, that window will shrink to 18 months for new wells, under a proposed change that leaves all other aspects of the exemption intact. The adjustment will not affect oil or gas wells completed before that date.
The horizontal well exemption, introduced to incentivize high-cost horizontal drilling, has been a longstanding feature of Louisiana’s severance tax policy. The proposed change applies to taxable periods beginning on or after July 1.
“The exemption for gas is typically paid out in 18 months, especially if the price of gas goes up,” Geymann said. “We are using that exemption to scale it back in order to make our fiscal revenues neutral.”
