Louisiana lawmakers get informed on state’s severance and property taxes ahead of possible changes

By Victor Skinner | The Center Square contributor

Louisiana lawmakers studying the state’s tax structure reviewed severance, gas, property and other taxes on Wednesday as they prepare for possible changes in the 2023 legislative session.

Members of the House Ways and Means Subcommittee on State Tax Structure heard from several officials with various state departments, Louisiana State University, and experts in the legislature on several types of tax revenues.

Alison Pryor, senior attorney for the Ways and Means Committee, laid out the severance tax basics for minerals other than oil and gas.

Overall, Louisiana collected $302 million in severance taxes on all minerals and other natural resources, including oil and gas, in fiscal year 2021, which is projected to increase to $428 million in fiscal year 2022 and to $420 million in fiscal year 2023.

Pryor explained the specific rates for numerous natural resources, from trees and timber to lignite, coal, salt, stone, sulphur and other minerals.

“There is a dedication back to locals of a portion of minerals that are severed,” she said, though she did not provide the specific amount. “There’s a maximum amount that can be given back to the locals, but that’s the only portion that is given back.”

Greg Upton, with the Center for Energy Studies at LSU, offered lawmakers a history of oil and gas tax revenues, as well as an overview of how those taxes are structured.

Upton presented data that shows the mineral revenues — severance, royalties, bonuses and rental payments — have declined from more than half of the state’s total revenues in the 1960s to about 4.5% in fiscal year 2022, when the state collected about $700 million.

Other oil and gas producing states have followed a similar trend, Upton said.

The decline is due in part to more oil production moving offshore into federal waters, though the Haynesville Shale formation in northwest Louisiana has increased natural gas production in recent years, he said.

Louisiana taxes oil at the highest rate in the nation at 12.5%, while its natural gas tax of 4% is relatively low compared to other states. Upton explained the reasoning behind the difference, and how a two-year, 100% exemption for horizontal drilling has impacted revenues.

“Over half of the potential severance taxes that could be received are exempt for natural gas because of that horizontal drilling exemption, while that’s only about 16% for oil,” he said.

A five-year average of severance tax revenues in Louisiana for 2017-21 totaled $391 million, with $253 million from oil, and about $138 million from gas. Of those revenues, the exemptions resulted in a loss of $51 million for oil, and $163 million for natural gas, the data shows.

Department of Transportation and Development Deputy Secretary Eric Kalivoda also presented information on the state’s fuels and vehicle registration taxes, which goes to the Louisiana’s Transportation Trust Fund.

Louisiana taxes gasoline, diesel and other special fuels at 16 cents per gallon, and 4 cents per gallon for aviation fuel. That includes a 4 cents per gallon tax for a Transportation Infrastructure Model for Economic Development program with specific dedications, he said.

In 2021, TTF collections excluding the TIMED tax totaled nearly $610 million, which is projected to increase to $616 million for fiscal year 2022, then decrease to more than $609 million for fiscal year 2023.

DOTD is also expected to begin collecting a portion of the vehicle sales tax in fiscal year 2023 that’s expected to be $161 million that year, then increase to $325 million the following year, Kalivoda said.

DOTD’s total budget for fiscal year 2023 is $1.1 billion.

Other presentations included an overview of the marijuana and controlled dangerous substance tax, consumable hemp products tax, and property taxes. Lawmakers are expected to continue regular hearings on the state’s tax structure in preparation for possible changes in the next legislative session, which begins in April.

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