American Oil and Gas Reporter - July 2015 - 30

State Legislative Reports

Louisiana Businesses Fill Budget Gap

BATON ROUGE, LA.-The 2015
Louisiana Legislature came and went with
no major changes for the state's oil and
natural gas industry, assesses Louisiana
Oil & Gas Association Vice President
Gifford Briggs. Lawmakers amended the
state's horizontal drilling incentive program, imposed a sales tax on utilities and
increased some fees, he says, pointing
out virtually no Louisiana businesses
emerged from the session unscathed.
According to media accounts, a $1.6
billion deficit greeted legislators at the
session's outset. Meanwhile, Governor
Bobby Jindal threatened to veto any
budget that he judged to be a net tax increase. Louisiana lawmakers largely closed
the gap by changing the state's refundable
tax credits to nonrefundable credits, Briggs
says, and avoided a net tax hike by
creating a tax credit to offset $350 million
in new revenue sources.
"The biggest concern was the overall
message that business were going to bear
the brunt of tax increases, even if they
were spread across all industries," he relates. "There was not any deal making. It
was legislators trying to figure out how
much money to raise and from where it
was going to come. They had a buffet of
bills from which to choose."
According to Briggs, the budget crisis
did not influence LOGA's stance on various
bills, but it did affect the vehemence of its
resistance. "If it raised taxes on our members,
we opposed it," he states. "However, the
environment in the legislature, in which
certain taxes were going to pass, may have
altered the intensity of our opposition."
HB 549, introduced by Representative
Major Thibaut, D-New Roads, which
Jindal signed in mid-June, modifies the
state's horizontal drilling tax incentive,
but not in a way that producers will
notice in the commodity price market
that has characterized the first half of
2015, Briggs notes.
According to the Louisiana Legislature's website, the revision amends the
state's severance tax law so that producers
receive 100 percent of the horizontal well
exemption if the previous year's average
New York Mercantile Exchange oil price
was at or below $70 a barrel. It phases
out gradually at higher prices until it is
eliminated at $110 a barrel. For natural
gas wells, the formula allows producers
to claim 100 percent of the exemption if
the previous year's average NYMEX gas
price was at or below $4.50 an MMBtu,
and phases the exemption out at higher

30 THE AMERICAN OIL & GAS REPORTER

prices until it disappears when prices exceed $7.00 an MMBtu.
Briggs notes the sales tax increase
comes in the form of HCR 8, sponsored
by Representative Jack Montoucet, DCrowley. The bill raises $103 million by
suspending business utilities' exemption
from the 0.97 percent state sales and use
tax levy. It is scheduled to expire 60
days after the 2016 Louisiana Legislature
adjourns. Formerly, Briggs notes, the
state charged $0.04 sales tax on business
utilities before policymakers began to
phase it out during the administration of
Governor Kathleen Blanco and eliminated
it entirely under Jindal.

Tax Shifts, Trims
LOGA also followed HB 805, by Representative Bryan Adams, R-Gretna, which
the governor signed in mid-June. According to Briggs, the measure raises
$129 million by shifting a portion of the
ad valorem tax credits to future years.
The legislation, he says, changes the tax
credit so that 75 percent is refundable
and the remainder can be applied against
future tax liabilities.
The governor also signed HB 624 by
Representative Katrina Jackson, D-Monroe, which raises $121 million by trimming
a number of corporate income tax exclusions and deductions by 20 percent. The
state's percentage depletion allowance is
among those, Briggs notes, and has been
reduced from 22.000 percent to 15.125
percent. He adds the bill was amended to
return the allowance back to 22.000 percent on July 1, 2018.
Similarly, Briggs notes, the legislature
approved HB 218 by Representative Chris
Broadwater, R-Hammond. It raises $29
million by adjusting the net operating
loss deduction for purposes of the corporate income tax.
Under the state's previous tax structure,
Briggs describes, corporations could reduce a current year's tax liability if they
deducted other years' operating losses
from their Louisiana net income by carrying losses forward 15 years. Alternately,
they could carry them back for three
years and amend a prior year's returns to
deduct from earlier positive net income,
which allowed them to generate refunds
of earlier tax payments. Under HB 218,
companies may not carry back their losses,
but they receive an additional five years
to carry them forward.
Also pertinent to the oil and gas industry was HB 284, which Representative

Gordon Dove, R-Houma, introduced to
permit the Louisiana Office of Conservation to raise fees. The office has not
increased fees for more than a decade,
Briggs notes. HB 284 also allows the
office to charge for previously free services. Estimates show the bill will bring
in $5.5 million to the OC.
Another successful OC-related bill
was HB 400 by Representative Clay
Schexnayder, R-Gonzalez. As Briggs describes it, the legislation establishes the
OC as the appropriate agency to regulate
intrastate liquefied natural gas facilities.
LOGA backed another Schexnayder
bill, HB 514, which passed the House in
mid-May but found no purchase in the
Senate. According to Briggs, the legislation
dealt with lawsuits that alleged a state-issued permit had been violated, and sought
to require the plaintiff to notify the agency
that issued the permit that a lawsuit alleged
the violation. He notes that HB 514 drew
little opposition on the House floor, but it
still died from lack of attention in the
Senate. "It would have been nice to see
Representative Schexnayder's bill go
through," Briggs admits. "It was unfortunate that it was not successful.
"The legislature had no desire to take
on significant issues if it could avoid
them," he adds. "Those issues in which
we were involved may have been important in their own right, but none of them
were significant game changers for the
industry, the state or anyone else. That is
kind of how the session played out. A lot
of the focus was on small reforms." ❒

W&T Offshore Reports
Ewings Bank Discovery

HOUSTON-W&T Offshore Inc. reports
a discovery at Ewings Bank 910 and first
production from the Medusa SS No. 6
well at Mississippi Canyon 538 field, both
in the deepwater Gulf of Mexico.
The Ewings Bank discovery came
with the successful drilling and evaluation
of the A-5 ST well, the company says. It
logged 160 feet of gross hydrocarbon interval. W&T says it is completing the
well, in which it has a 50 percent working
interest.
The Medusa SS No. 6 well has been
completed and achieved first production,
flowing at a daily gross rate of 8,000
barrels of oil and 6 million cubic feet of
natural gas for a total rate of 9,000 barrel
equivalent.
❒
American Oil and Gas Reporter - July 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - July 2015
