Mineral Revenues in LouisianaLouisiana State Seal

Mineral Revenues in Louisiana

Recommendations Submitted to Senate Committee on Revenue and Fiscal Affairs and House Committee on Ways and Means of the Louisiana Legislature

Dr. Greg Upton, LSU Center for Energy Studies
Dr. James A. Richardson, LSU Public Administration Institute

This report is in response to Senate Concurrent Resolution 4 of the 2018 second extraordinary session
and is a continuation of work from the Task Force on Structural Changes in Budget and Tax Policy created by House Concurrent Resolution 11 of the first extraordinary session of 2016.

We take a broad and long-term look at Louisiana’s severance tax system. After meetings with public and private stakeholders, reviewing the literature on the taxation of oil and gas, and analysis of statistical information, we present our recommendations on how the legislature might simplify the tax system, as well as general information and analysis to aid in policy decisions.

Major Recommendations

  1. Institute an equivalent volumetric tax rate for oil and natural gas with rate to be established semi-annually;
  2. Remove exemptions associated with horizontal drilling, tertiary wells, and deep wells for new activity;
  3. Implement recommendations (1) and (2) simultaneously while maintaining revenue neutrality with respect to current severance tax projections;
  4. Implement the new severance tax rates for oil and gas production from new activity; activity originated before tax law change will comply with the current tax structure.

These recommendations are consistent with a broad base and low rate philosophy, revenue neutrality for severance tax collections, and administrative efficiency.

Alternative Recommendations

  • Establish a volumetric tax rate for oil with the rate to be established semi-annually;
  • Remove the verbiage “posted field price” from R.S. 47:633 (7);
  • Review and simplify the calculation of the volumetric rate for natural gas and establish the rate
    semi-annually;
  • Remove exemptions associated with horizontal drilling, tertiary wells, and deep wells while maintaining revenue neutrality with respect to current severance tax projections. 

View or download the report here. 

Feedback from Industry

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Response

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