Louisiana Severance Tax Relief Program

I have recently heard about the Louisiana Severance Tax Relief Program.  The Severance Tax Relief Program allows the suspension of severance taxes due on production from a qualifying well for a variable time period depending on the category.

 

The Office of Conservation certifies qualification under this program in four (4) categories, three (3) of which involve a Well Cost Statement:


1. Inactive Well
2. Deep Well
3. Horizontal Well
4. New Discovery Well.

If correctly applied for, a well fitting one of these categories would be eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

 

It seems to me that a Haynesville well that has been drilled on my section would fit into at least one of these categories.  However, my question is, are the drilling companies operating these wells required to apply for this severance tax relief program?  If so, wouldn’t it be wrong for them to charge me a severance tax deduction on my royalty check for a newly completed Haynesville Well?

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Permalink Reply by Parkdota on July 11, 2011 at 13:01
Baron, is this a tax that they are taking out that would have to be paid anyway or is it an additional tax?
Permalink Reply by The_Baron on July 12, 2011 at 4:19

Parkdota:

 

A Severence tax is owed on all minerals when they are "severed from the land".

 

This is usually deducted on revenue checks and remitted to the state by the operator, or in some cases directly by the gas/oil buyer. You still owe tax on your income from the well, wiether it be royalties or working interest. An accountant will be able to look at your statements and determine if any deductions can be made. The effect of the severance tax rebate, is that you will retain more moneies, untill time runs out or the well pays out.

 

Permalink Reply by Parkdota on July 12, 2011 at 5:05

Baron, I think I finally have a grasp on this thing except for the finite tax rate.  I found this on line:

Taxes

"How do I tax thee? Let me count the ways. Severance tax, conservation tax, oil field cleanup tax, emergency fund tax; each state is free to design their own scheme regarding oil and gas taxation. Each state varies in their approach, but it’s safe to say that the overall take usually runs in the 5-8% range, regardless of how it is derived. Severance tax is usually the dominant tax, with lesser taxes often pointed toward environmental cleanup type programs. Many states offer tax breaks based upon variables such as low rate wells (stripper wells), enhanced oil recovery wells, or reactivated wells."

 

So, does anyone know the exact tax rate of severance tax in Louisiana?????????

Permalink Reply by The_Baron on July 12, 2011 at 5:20
Severance Tax Rates in Louisiana -

Natural Gas
$.288 / MCF through June 30, 2009
$.331 / MCF Beginning July 1, 2009


Oil
12.5 % - Full Rate Oil/Condensate
6.25% - Incapable Oil
3.125% - Stripper Oil Rate
3.125% - Reclaimed Oil

Permalink Reply by HBP on July 12, 2011 at 5:32
7/10 through 6/11 $.164/MCF
7/11 through 6/12 $.164/MCF
Permalink Reply by Parkdota on July 12, 2011 at 9:20
Baron, so if a well in one month this June 2011 produces 400mmcf of gas then the tax would be (based on severance tax rates via HBP above this post) roughly $65,600?  If this number is correct and let's say someone had an ownership rate of 0.01 then their tax of the previous number would be $6,560? 
Permalink Reply by HBP on July 12, 2011 at 9:39
drop a zero to $656, then your close enough.  pretty good well - congrats.
Permalink Reply by Parkdota on July 12, 2011 at 10:29
HBP and Baron, thanks for the info.  Yeah, my math was off....it's been a long day ha. In MS it's 105 w/heat index and my brain is melting.  At least now I have an idea of the tax situation.  Death and taxes, right?
Permalink Reply by Henry on July 12, 2011 at 0:08

DrWaveSport,

 

I'd ask about the $389k for title work, legal fees, etc.  Make sure they are not putting other people's title searches on your bill.  You should only have to pay for the title work associated with your land.  JMHO.

Permalink Reply by The_Baron on July 12, 2011 at 4:12
As a WI or UMI owner, you will pay for all the title work in the Unit. Just the way it works.
Permalink Reply by Henry on July 12, 2011 at 5:38
Seems unfair.  WI and UMI don't pay for the entire cost of drilling and ops.  Why should they pay for the entire cost of title work?  Seems fair that they should pay for their own, not others.  Oh well, that's why going WI and UMI, especially with CHK, is not for me.
Permalink Reply by The_Baron on July 12, 2011 at 6:25
sure they do. Everyone pays their proportional share.

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