LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: HB 634 HLS 23RS 1347
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 5, 2023 1:39 PM Author: MCFARLAND
Dept./Agy.: Revenue/Natural Resources
Subject: Determines date production begins on deep wells Analyst: Deborah Vivien
TAX/SEVERANCE TAX EN DECREASE GF RV See Note Page 1 of 1
Provides relative to a severance tax exemption for deep-well oil and gas production
Current law provides a 100% exemption from oil and gas severance tax for deep wells (true vertical depth greater than
15,000 feet) for 24 months commencing on the date production begins (also considered initial completion date by current
practice) and lasting for the lesser of 24 months or the payout of the well cost.
Proposed law designates deep water well production as commercial production for purposes of the exemption. Proposed law
allows the date production begins to be a date subsequent to the well completion date and shall be the first day the well
produces into permanent production equipment and the facilities have been constructed to process and deliver the product
to a sales point. Certain tests or other related production shall not be deemed to begin the exemption period, even if the
date is classified as active production by the Department of Natural Resources (DNR). Effective upon signature.
EXPENDITURES 2023-24 2024-25 2025-26 2026-27 2027-28 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 2023-24 2024-25 2025-26 2026-27 2027-28 5 -YEAR TOTAL
State Gen. Fd. DECREASE DECREASE DECREASE DECREASE DECREASE
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 DECREASE DECREASE DECREASE DECREASE DECREASE
Annual Total
EXPENDITURE EXPLANATION
There is no anticipated direct material effect on governmental expenditures as a result of this measure.
REVENUE EXPLANATION
The bill may reduce state general fund as the date the exemption begins could become a later date than the well completion
date that is currently used. If the exemption begins at a later date, the 100% exemption could extend beyond the 24
months that is currently considered. The impact will depend on the lag between the well completion date and the date
production begins, as defined in the bill. If there is a small lag between the dates, the impact to severance tax collections
should be small. If there is a long lag between the dates, the impact to severance tax collections should be larger. Deep
wells contribute a minimal amount of oil and gas severance. It is not clear how much more severance will be exempted
should the 24 month exemption be situated over a different time period, as this bill would allow.
According to LDR and the Tax Exemption Budget, this exemption has been valued at $2.6 M in FY 20, $537,000 in FY 21 and
$1.6 M in FY 22, and since 2016 less than 10 taxpayers have applied for the exemption for less than 15 wells. Depending on
how far the date production begins is subsequent to the initial well completion date to begin the 24 months of exemption,
some indeterminate portion of these amounts may reduce state general fund as the exemption could extend over a longer
timeframe.
To the extent severance tax collections are reduced, parish severance allocations in which the impacted deep wells are
located will also decrease. If impacted deep wells are located on state lands, increases in royalty payments may offset some
state severance loss.
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}
Alan M. Boxberger
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Interim Legislative Fiscal Officer
or a Net Fee Decrease {S}


Statutes affected:
HB634 Original: 47:633(9)
HB634 Engrossed: 47:633(9)
HB634 Reengrossed: 47:633(9)
HB634 Enrolled: 47:633(9)
HB634 Act : 47:633(9)