A new Louisiana law, once it goes into effect, is aimed at providing an incentive for oil and gas companies to reactivate abandoned or orphaned oil wells, including many left dormant amid a downturn in crude prices, The Courier reports.
“This is a tremendous step in the right direction to reignite Louisiana’s oil and gas industry, create jobs, and increase revenue for the state,” Don Briggs, president of the Louisiana Oil and Gas Association, says in a statement.
Act 421, which takes effect July 1, 2018, lowers the severance tax rate by 50% for companies that resume drilling at inactive wells. The law reduces the tax by 75% on wells that have been a part of the state’s Orphaned Well Program for five years or longer.
The association made the measure, introduced by House Natural Resources Committee Chairman Stuart Bishop, R-Lafayette, a top priority during the three-month regular legislative session that ended last month.
Louisiana’s oil industry has been hit hard by a three-year bust in which global crude supplies have outpaced demand. Prices have dropped from a high of around $115 a barrel in mid-2014 to under $50 a barrel, resulting in the loss of thousands of jobs locally and statewide.
More than 3,500 wells across Louisiana have been abandoned by producers that have gone out of business, according to published reports.
The state Department of Natural Resources estimates that more than 10,000 other inactive wells are at risk of becoming orphaned. Money for cleanup or plugging those sites often comes from state taxpayers.
