The bill, HB 418, proposes amendments to the severance tax rates on oil and gas production from inactive and orphan wells. It establishes new reduced rates of 25% for production from inactive wells and 12.5% for production from orphan wells, applicable if production commences before October 1, 2028. Conversely, if production begins on or after that date, the existing rates of 50% and 25% will apply, respectively. Additionally, the bill extends the deadline for applications for inactive or orphan well status from June 30, 2023, to June 30, 2028, allowing more operators to qualify for the special tax rates.

The bill also includes provisions for the certification process of inactive or orphan wells, stipulating that operators must apply to the Department of Energy and Natural Resources to receive the special rates. If the severance tax is paid at the full rate before certification, operators can claim a credit against future taxes. The proposed law is set to take effect on October 1, 2024, and aims to incentivize the production of oil and gas from previously inactive or orphaned wells, thereby potentially increasing resource extraction in the state.

Statutes affected:
HB418 Original: 47:633(7)
HB418 Engrossed: 47:633(7)
HB418 Enrolled: 47:633(7)
HB418 Act 695: 47:633(7)