Are state laws regarding severance taxes costing Louisiana money?

On behalf of Rock Palermo of Veron, Bice, Palermo & Wilson, LLC posted in Oil and Gas on September 02, 2014.

Louisiana is one of many states in the nation that levies taxes against oil and gas companies that extract natural resources from the ground. These taxes, called severance taxes, often go towards helping maintain city streets, construction projects and maintenance, and even environmental protection.

But the decision to amend the tax law may have considerable consequences that may cost a state millions of dollars. Some activists here in Louisiana say this is the problem our state is facing because of changes made twenty years ago to our own severance tax laws.

For those of our readers who do not know, the severance tax was implemented in 1910 and helped pay for much of our bridges, roads and hospitals. But in 1994, severance laws were changed to give new oil and gas wells exemption from the severance tax for up to two years or until the well was paid off.

According to one activist and resident of Lafayette, the changes made to the state's severance tax law encourage oil and gas companies to "drill quickly, pull out and pay no taxes." This statement may be bolstered by the fact that the Department of Revenue estimates a loss of nearly $250 million in a five-year span because of horizontal drilling. Overall oil and gas activities may have surpassed $482 million.

Some fear that the most recent efforts to drill in St. Tammany could leave the area with poor air quality or even contamination. But without adequate severance taxes to help fund cleanup projects or to promote environmental conservation, the area once considered a retreat by so many in Louisiana may struggle to recoup that beauty once drilling has ceased.

Source: The Huffington Post, "Oil Industry's Image Is Tarnished in Louisiana, Green Activist Says," Susan Buchanan, Aug. 31, 2014

Tags: Oil and Gas

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