LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 171 SLS 21RS 167
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 15, 2021 9:23 AM Author: ALLAIN
Dept./Agy.: Natural Resources / Revenue
Subject: Orphan Well Site-Specific Trust Funds Analyst: Greg Albrecht
TAX EXEMPTIONS EN SEE FISC NOTE SD RV See Note Page 1 of 1
Provides for severance tax exemptions and site-specific trust funds for certain orphan wells. (gov sig)
Proposed law exempts from severance tax oil production, commencing on or after October 1, 2021 and before June 30,
2031, from orphan wells that undergo the Department of Natural Resources permitted well enhancements, and that have
reported no production for at least 12-months prior to being enhanced. Beginning in the fourth month after certification, the
operator shall remit the severance tax dollar equivalent to the Department of Revenue for credit to site-specific trust
accounts for each participating well. The trust accounts are to be a source of funds for future site restoration when required.
Effective upon governor's signature.
EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0 $0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other SEE BELOW SEE BELOW SEE BELOW SEE BELOW SEE BELOW
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
EXPENDITURE EXPLANATION
The Department of Natural Resources (DNR) indicates that it would be able to handle any associated additional workload
with existing staff. To the extent wells participate in the bill’s provisions, DNR would have to confirm no production in the
prior two-year period, review and approve third-party contractor site assessments and restoration plans and costs, as well as
administer the associated trust accounts.
REVENUE EXPLANATION
The bill appears to apply to oil wells designated by the Department of Natural Resources as part of an orphaned oilfield site.
The Dept. reports that there are over 4,000 orphan wells in the state, and that over 90% of them presumably could qualify
for the bill’s provisions. However, the department is unable to reasonably project the number of such wells and volume of
production that might participate in the program. While the bill provides a severance tax exemption for production from
participating orphan wells, it requires the operator to pay the severance tax equivalent to the Dept. of Revenue for credit to
the associated site-specific trust account. Thus, any tax incentive attributable to the bill, to attempt to produce from an
orphan well, seems uncertain. To the extent orphan wells are brought back into production, the bill would result in an
increase in dedicated funds in the site-specific trust accounts, and a consequent diversion from the state general fund where
severance tax would otherwise flow. However, it does not seem likely that this effect would be significant, and there is no
baseline of expected orphan well activity assumed in the severance tax forecast.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Christopher A. Keaton
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} or a Net Fee Decrease {S} Legislative Fiscal Officer