LA SEVERENCE TAX LAW FALLS SHORT OF TRIGGER - shreveporttimes.com, Dec. 23, 2012
By Vickie Welborn
Two years ago, Louisiana voters approved a constitutional amendment that was designed to put more money into the coffers of parish governing bodies where oil and gas development was taking a toll on infrastructure. Parish officials still are waiting for those funds to materialize.
The goal was to allow parishes that collect severance taxes from oil and gas production to keep a greater portion of the proceeds that are shared with the state. Prior to the law’s passage on Nov. 2, 2010, the constitution capped the maximum amount remitted to the parishes at $850,000. One-fifth, or 20 percent, of all natural resources other than sulphur, lignite or timber severed from the land is supposed to be remitted by the state to the parish of origin.
The new law, which was effective April 1, would have increased the amount in the first year to $1.85 million. In subsequent years the maximum was not to exceed $2.85 million. At least half of the money was supposed to be earmarked for road and bridge projects. Approximately $47 million annually was projected to return to the 30 major energyproducing parishes, which include Caddo, Bossier, DeSoto and Webster, according to estimates in 2010 from the Legislative Fiscal Office.
But the maximum amount remitted to a parish is tied to the average increase of the Consumer Price Index for the previous year. And the law includes a provision that links the remittance of “excess” severance taxes to the forecasted state revenues and requires the figure to exceed fiscal year 2008-09 collections.
So the trigger for the amendment to kick in is $895 million, Police Jury of Louisiana Executive Director Roland Dartez said. It got close last year but is predicted to fall $100 million in 2012-13.
“We’ll all be very happy if we hit that number,” Dartez said. “We’re hoping when production goes up we will meet it.”
In the meantime, the state, because of the CPI, is retaining 97 percent of severance tax collections and only sharing 3 percent with the parishes.
“That’s huge,” Dartez said.
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Replies to This Discussion
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Permalink Reply by Max on -
One has to admit, finding income for local governments has become an art. It makes common sense for dollars produce in a give location to benefit that location's needs. Receiving an greater percentage of the tax upfront instead of asking for those tax revenues back from the State, puts more control in the hands of local folks.
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Permalink Reply by Skip Peel - Mineral Consultant on
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IMO the energy industry should lobby for a temporary discount to the severence tax in exchange for direct assistance to local municipalites for the maintainence and upgrade of existing roads in areas of active development. The citizens of the county or parish and the operating companies have a shared need for usable roads. The state does not. And trying to get money back from the State of Louisiana at this time is a waste of time. The industry needs to improve its public perception and be seen as a responsible partner in the exploration and production of minerals. A closer working relationship with the representatives of the residents/land owners most affected would be a postive move when the industry needs public goodwill and support for issues such as hydraulic fracturing. The industry too often comes off as detached or, worse, arrogant. PR has never been their strong suit.
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Permalink Reply by Hopeful About Natural Gas on
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I don't know the laws in Louisiana, but in my state landowners who did NOT have a well drilled would be p.o.'d about the damage to roads they have to drive on.
If the state does not fix the roads and the parish does not then who does that leave? The company? Homeowners? Or, the landowners who have wells on their property? After all, the trucks and work needed to work the wells could have really sped the destruction of the road. I don't know the laws in Louisiana but I could easily see that happening in most states in the West.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Coordination between local municipalities and the industry is much more straight forward and cost effective for all the stake holders. E&P companies have working relationships with subcontractors that build roads and pads and with material suppliers. The industry builds very good roads both aggregate and asphalt. Local municipalities have some monies for road maintenance and the ability to grant short term sales tax discounts. I an unaware of any attempts by the industry to negotiate a working relationship with a municipality in regard to solving the challenges of rural roads woefully short of adequacy when it comes to heavy truck traffic but I consider it both possible and prudent.
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Permalink Reply by Jo Ann Carter on
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Now ya'll be careful because you will give CHK another idea about how to take more deductions from our royalty checks.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Jo Ann, IMO it is helpful to recognize that CHK is quite often a special, and separate, case from the rest of the industry. A good bit of litigation involving CHK should make it to court in 2013 and those ruling will have significance for the company and its lessors. The wider industry will hopefully begin to appreciate the value of PR and the goodwill of the public and move to make exploration and production less intrusive and costly for locals. That is one of my New Year wishes.
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