State, oil and gas industry work toward middle ground on tax incentives

Louisiana Oil & Gas Association President Don Briggs says his industry is working with the Jindal administration to adjust the state’s tax incentive programs. “Some things are going to stay, some things are going to be taken out,” Briggs says. “We’re just going to have to give a little bit.” For example, the state has a severance tax exemption for horizontal wells that lasts for two years or until the wells pay off their costs, whichever comes first. That might be changed to a five-year, 50% reduction, which would still benefit well owners but provide more upfront money to the state, Briggs says. Department of Revenue head Tim Barfield says they’re looking for a balance that raises more money yet doesn’t put the state’s oil and gas industry at a competitive disadvantage, keeping in mind that the industry will benefit from the elimination of income and franchise taxes. In other words, Barfield wants incentives that are generous enough to keep companies drilling in Louisiana, but not so generous that oil and gas taxpayers receive “a windfall.” Closing or curtailing tax exemptions is part of the process for making Jindal’s proposed “tax swap” revenue-neutral. Other measures include reducing the cost of exemptions for LED programs from $400 million annually to $325 million, although the full savings wouldn’t be reached for three years because of existing commitments, Barfield says. —David Jacobs