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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Replies to This Discussion

Permalink Reply by FXEF on July 16, 2011 at 16:07

Baron,

Are WI and UMI owners charged for the lease bonus payments in the unit?

Permalink Reply by The_Baron on July 18, 2011 at 3:09
Shouldn't be. But they could be charged for any curitive work that needs to be done once the well is drilled as well as for the Title Opinion/Division Order
Permalink Reply by Katie McCullin on July 14, 2011 at 1:52

DrWAVeSport - The program is great, but it's definitely confusing. If you want to talk to some at CHK about the details, i can put you in contact with someone who can break it down for you. Let me know if I can help! Thanks!

Permalink Reply by Joe Ring on July 13, 2011 at 11:22

Joe:

 

The operator must apply through the Department of Revenue of La. and complete the necessary forms.  You might ask the operator, whomever they/he is, if they are even aware of these deductions.  Many are not.

 

I personally have applied for and gotten an exemption on a horizontal well and a re-entry well (one that has been inactive for a period of 24 months).  A little hastle, but wel worth it.  On re-entry, there is a five (5) year severance tax exemption.  On a horizontal well, a severance tax exemption  while recovering the drilling and completion expenses.

Gooda luck!!

Permalink Reply by DrWAVeSport Cd1 on January 4, 2012 at 14:08

JR,

Your statement, "while recovering the drilling and completion expenses."  How so?  Do you mean through amortization for tangible/intangible drilling costs?

Thanks in advance.

DrWAVeSport Cd1  1/4/2012

Permalink Reply by The_Baron on January 5, 2012 at 6:08

For Horz. wells the exemption is equal to the cost to drill and complete the well.

 

Or it expires after two years, whichever comes first. So basically if your well pays out you esentially recover your drilling and completion expenses.

Permalink Reply by DrWAVeSport Cd1 on January 5, 2012 at 8:58

Baron,

The tax exemption is strictly for severance on sales, I agree.  The recoup of D&C costs is amortized.  Just looking at the 5yr and 7yr recovery periods through ebita.  Two different costs, taxes v.  D&C costs.

Thanks,

DrWAVeSport Cd1 1/5/2012

Permalink Reply by Henry on January 4, 2012 at 5:20

It is hard to believe... I spoke with the revenue people today, at one of the major operators, and they claimed to have no idea about the Severance Tax Relief Program in Louisiana.  They are charging people for severance tax deductions.  How can this be???

Permalink Reply by The_Baron on January 4, 2012 at 6:10

its more common place than you might expect.

Permalink Reply by VSC DeSoto South on January 5, 2012 at 9:47

Is there a phone number to call and find out if a severance tax exemption has been requested? My operator says they applied, but that was 8 months ago. The severance tax is still being deducted so I assume they have not received the exemption yet. I would like to check with the state office myself though.  Thank you.

Permalink Reply by DrWAVeSport Cd1 on January 5, 2012 at 10:07

VSC,

On Page 1 of this discussion, you will find great instructions from GHShaler "Spring Branch" per the LA Sonris Main, HS well tax severance tax relief application/form.  If you follow SB's instructions, and if the application has been made, you will find out whether or not the application was approved or denied. 

Don't know about a phone number, but this Oracle application works and the info is there on Sonris Main site.  Just follow SB's instructions.  (LA has been pretty spontaneous with its approvals when application has been made.)

DrWAVeSport Cd1 1/5/2012

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