Thursday, May 30, 2024

Parishes could see larger oil and gas revenues if voters approve

by BIZ Magazine

By Wes Muller, Louisiana Illuminator

Lawmakers advanced two proposed constitutional amendments Monday that would give parish governments a larger share of oil and gas tax revenues if Louisiana voters support the changes.

House Bill 277, sponsored by Rep. Larry Bagley, R-Stonewall, and House Bill 278, from Rep. Jack McFarland, R-Winnfield, passed the House Committee on Civil Law and Procedure without objection. 

Both measures would allow parish governments to keep a larger share of the revenues from severance taxes levied on natural resources when they are taken from the earth. Oil and gas account for almost 92% of all severance tax collections in Louisiana, according to the state Department of Natural Resources.

The Louisiana Constitution says parishes get to keep 20% of the severance taxes collected within their borders but are limited to a maximum dollar amount that fluctuates with inflation every year. Currently, the cap is about $1.1 million per parish.

The state keeps any amount of tax revenue generated above that cap. For instance, Bagley said Sabine Parish remitted roughly $72 million in severance taxes last year. A 20% share would have allowed the parish to keep more than $14 million, but the cap brought it down to just $1.1 million. 

Bagley’s bill would raise the cap to $10 million to give parishes money to repair infrastructure the fossil fuel industry “tears up” with large trucks and heavy equipment continuously traversing the roadways, he said.   

“Any of you (who have) been to the parishes that are big oil and gas [producers] know the damages done?” Bagley said. “If you don’t, I can show you some videos of Desoto Parish and Caddo Parish and Sabine Parish, where I live.” 

The other bill, from Rep. McFarland, targets different provisions in the constitution and would effectively set the cap at roughly $2.85 million.

“It’s been disingenuous for us that we tell the locals that you’re getting 20% of this severance tax,” McFarland said. “But you’re not. We’re not actually giving them 20%.”

Opposition to the proposals has yet to surface, even though the state would take a significant financial hit if either is enacted into law. Bagley’s bill would reduce state revenues by roughly $187.6 million over five years, while McFarland’s would cost roughly $84.8 million over the same period, according to the fiscal notes for each bill.  

The House Ways and Means Committee approved both bills in April and await House floor consideration. Constitutional amendments require two-thirds support in both chambers to be placed on a ballot for voter approval. 

McFarland said his proposal is serving as a backup option in case Bagley’s bill gets hung up with its higher fiscal note, though McFarland said the biggest hurdle will be Louisiana’s voters who have rejected similar measures in the past.  

“The support from the legislators has always been here,” McFarland told the House Civil Law Committee. “It’s just we have to help educate the public and get them to recognize the challenges associated with it.”

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