TAX NEWS - JUNE 2010

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Louisiana Tax: Senate kills bill repealing oil, gas severance tax

BATON ROUGE, La. — The state Senate shelved a controversial bill Tuesday that would repeal Louisiana's severance tax on oil and gas production and replace it with a processing tax.

The idea has been bandied about in the Louisiana Capitol since the Treen administration in the early 1980s, but Democratic Sen. Rob Marionneaux said the oil gusher in the Gulf of Mexico and the state's dire financial straights underscore the need to change the current system.

Marionneaux's proposed measure would have allowed Louisianians to vote in November whether to levy a tax on oil and gas brought into the state for processing.

"I want to do something about the way we do business," Marionneaux said. "The oil companies have run the state capitol long enough."

Marionneaux said while oil and gas producers in Louisiana are taxed at up to 12.5 percent, the 827 million barrels of oil brought into the state for processing each year are not taxed.

"Why tax Louisiana residents and not the BPs of the world?" Marionneaux asked. "When the ship comes up the river from Saudi Arabia, they pay nothing."

With a 3 percent tax on all oil and gas coming into the state, Louisiana could generate $1.2 billion in revenue each year, enough to replace the $911 million that Louisiana landowners and producers paid in severance taxes in 2009.

After nearly two hours of debate, the measure failed in a 6-31 vote.

Money from the processing tax should be used to pay for coastal erosion, highways and education, Marionneaux said.

In the 50 years Louisiana has been producing oil off its coast, the state has lost 1,900 square miles of land to coastal erosion. While the oil industry has recognized it has caused much of this erosion, the industry has done nothing to help rebuild the lost land, Marionneaux said.

"Louisiana serves the nation's energy needs ... and yet we beg for our coast to be restored," he said of the 25 square miles of land lost each year. "No one in this body can say that's fair."

Critics of the bill, including the state's powerful oil and gas lobby, have said it would drive refineries and jobs out of the state and cause consumers pain at the pump through higher gas prices.

Sen. Robert Adley, R-Benton, estimated that the processing tax would lead to a 30- to 40-cent price increase per gallon of gas for consumers.

Democratic Sen. Willie Mount, from refinery-rich Lake Charles, said that the bill would cause oil companies to bypass her area in favor of nearby refineries in southeast Texas that don't have a processing tax.

Mount said that 52 percent of jobs in Calcasieu Parish are oil-related.

Marionneaux countered that Louisiana has so many pipelines and refineries that it would be prohibitively expensive for oil companies to leave the state.

Sen. Karen Carter Peterson, D-New Orleans, said senators voting against Marionneaux's bill would be giving the oil companies a free pass.

"You turn on your television and you see this stuff washing up on our shores," she said. "Let's make sure they pay for the damage they're doing."
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