LSU Mineral Revenues in Louisiana

March 9, 2020

BATON ROUGE - Professors Gregory B. Upton, LSU Center for Energy Studies, and James A. Richardson, LSU Public Administration Institute, have authored the report “Mineral Revenues in Louisiana,” prepared in response to Senate Concurrent Resolution 4 of the 2018 second extraordinary session. The report 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.

In the report, Upton and Richardson take a broad and long-term look at Louisiana’s severance tax system. After having met with public and private stakeholders, reviewing the literature on the taxation of oil and gas, and analysis of statistical information, they have prepared recommendations on how the legislature might simplify the tax system, as well as general information and analysis to aid in policy decisions.

Their major recommendations are

  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 are

  • 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 report