Louisiana’s 2025 legislative session passed a bill that significantly impacts oil producers across the state. House Bill 600, introduced by Representative Geymann, proposed a reduction in severance tax rates for oil produced from newly completed wells and offers lower, simplified tax rates for certain limited-production wells.
Here’s what’s on the table:
- New Wells, Lower Taxes: For oil wells completed on or after July 1, 2025, the severance tax rate would drop from 12.5% to 6.5% of the oil’s value at the time of severance.
- Special Rates for Low-Output Wells:
- Incapable wells (those producing 25 barrels/day or less and 50% salt water) would see a reduced rate of 6.25%.
- Stripper wells (10 barrels/day or less) would be taxed at 3.125%.
- Inactive or orphaned wells brought back into production would qualify for reduced rates ranging from 6.25% to as low as 1.565%, depending on classification and timing.
These changes are designed to encourage the reactivation of marginal wells and reduce the financial burden on operators bringing new wells online. The bill aims to strike a balance between stimulating oil production and generating revenue for the state.
The new rates will take effect for taxable periods beginning July 1, 2025.
