American Oil and Gas Reporter - February 2021 - 38

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IssuesUpdate: Louisiana Oil & Gas Association

LOGA Looks To Revive
Activity Incentives
By Del Torkelson
JENA, LA.-Although gallows humor
about the uncanny awfulness of 2020
spread across social media and served as
an icebreaker on Zoom calls as early as
last March, last year featured some big
wins for the Louisiana Oil & Gas Association. Despite facing unpleasant surprises
unique to oil and gas companies, such as
a Russian-Saudi crude oil price war and
an unprecedented interval of negative oil
prices, LOGA achieved a significant ballot
box victory.
LOGA Chairman Jim Justiss, president
of Justiss Oil Co. in Jena describes voters'
November approval of Constitutional
Amendment 2 (CA-2) as the association's
biggest triumph of 2020. CA-2 allows
the presence or production of oil or gas
to be weighed when assessing the fair
market value of an oil or gas well, a consideration LOGA deems " all about fairness
in ad valorem assessments, " (AOGR, December 2020, pg. 28).
" CA-2 gives auditors the ability to
consider our assets' true value, " Justiss
comments. " Now they are not painted
into a corner on property valuations that
we cannot afford. "
LOGA Interim President Mike Moncla
says the association supported CA-2
through a full-court press of mass media
interviews and other public outreach made
necessary by the unavoidable complexity
of ballot language.
" When a proposed law appears on the
ballot, it can be hard for the average
voter to understand what it means, "
Moncla relates. " That uncertainty becomes
an even bigger hurdle when a proposal
contains the unpopular word 'tax.' "
" For the common voter, 'tax' carries
an odor, especially on the ballot, " Justiss
concurs. " Everyone's first inclination or
reflex is to pull the 'no' lever, but LOGA
did a great job of educating people. "
LOGA came tantalizingly close to
another triumph when the Louisiana
Legislature passed HB 29 during its
Second Extraordinary Session on Oct.
21. Governor John Bel Edwards vetoed
the legislation-which would have pro38 THE AMERICAN OIL & GAS REPORTER

" Governor Edwards is a smart guy, but he
has a firm commitment against tampering
with peoples' right to pursue any damages they
believe they have suffered. "
-Jim Justiss
LOGA Chairman
vided temporary severance tax relief
for new wells, or shut-in or orphan
wells placed back into production-on
the final hour of Nov. 12, the last day
he could act before the bill became law
without his signature (AOGR, December
2020, pg. 12).
Describing the bill as smart policy,
Moncla says LOGA intends to back
similar language during the 2021 Louisiana
Legislature while taking steps to persuade
the governor not to kill it.
Encouraging Activity
The story of HB 29 begins on a September afternoon, less than half a week
into Moncla's tenure as interim president.
" I took the job on a Friday; that Sunday,
I was home watching the U.S. Open
when I received a call from an unknown
number out of Eunice, La., " he recounts.
" It was Representative Phillip DeVillier,
R-Eunice, who informed me there was
going to be a special session in eight
days, and that he planned to run a bill on
which he wanted our support. "
According to Moncla, DeVillier worried Louisiana's unusually steep crude
oil severance tax was discouraging new
projects, and he wanted to know if Moncla thought an exemption for new oil
wells would encourage drilling. Moncla
agreed such a move would spur a few
more projects while fortifying those
that already had a green light. However,
he indicated, a savvy incentive would
cast a wider net.

" I told him if he wanted to create jobs
and stimulate oil field activity, he should
include workovers, re-entries, plugbacks,
sidetracks and other operations that are
much less capital-intensive, " Moncla explains. " In today's world, many companies
lack the money and investors to spend
millions on a new well, but they have
workover projects sitting on the back
burner. These wells are shut in, but tax
advantages may convince their owners
to spend $100,000 on a workover to bring
them back on line. "
DeVillier agreed and incorporated
such language into HB 29. Unfortunately, Moncla continues, the legislature's fiscal office estimated the bill
would cost the state $157 million over
five years. Even with that estimate,
which Moncla calls questionable, the
bill garnered enough support to clear
the House. Later, the Senate passed an
amended version that trimmed the severance tax exemption's duration, but
also applied it to orphan wells. After
the House concurred, the legislature
sent to the governor's desk an exemption
that would have lasted:
· Six months or until payout for shutin wells;
· Twelve months or until payout for
new wells; and
· Twenty-four months or until payout
for orphan wells.
" We got it through the House and Senate
with no problems and it sat on the governor's
desk until it was one hour from becoming



American Oil and Gas Reporter - February 2021

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American Oil and Gas Reporter - February 2021 - 1
American Oil and Gas Reporter - February 2021 - Cover1
American Oil and Gas Reporter - February 2021 - Cover2
American Oil and Gas Reporter - February 2021 - Contents
American Oil and Gas Reporter - February 2021 - 4
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American Oil and Gas Reporter - February 2021 - Cover3
American Oil and Gas Reporter - February 2021 - Cover4
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