House panel advances package to lower oil severance tax, tighten gas exemption after fiscal trade-offs

House Committee on Ways and Means members advanced a three-bill package May 5 that would reduce the state’s severance tax on newly produced oil and limit a generous horizontal-well exemption for certain natural-gas production, with supporters saying the measures were intended to be considered together to limit net fiscal harm to the state.

The committee reported favorably on House Bill 600 — the oil piece — and reported with amendments House Bill 495 (the gas exemption change) and House Bill 518 (technical/administration provisions). Representative Barry Guymon, lead author on the package, told the committee: “It reduces the severance tax from 12 and a half to 6 and a half, and that's all the bill does.”

Supporters say the oil reduction aims to make Louisiana more competitive with neighboring states. Guymon said the oil rate cut, by itself, carries a negative fiscal note, but that the package pairs it with changes to gas taxation so the combined effect is closer to revenue-neutral. “You will see a fiscal note on there, but you have to go look at the other bill to see where we are offsetting that,” Guymon said. He and supporters repeatedly described the three measures as a single, negotiated package.

Why it matters: The committee and outside analysts framed the bills as an economic-development effort to revive conventional oil drilling in parts of Louisiana where the industry has slowed. At the same time lawmakers and the state’s energy analysts sought to avoid a large hole in the budget by reducing exemptions or changing rates affecting horizontal natural-gas production.

Key numbers and fiscal trade-offs - HB 600 (oil): cuts severance tax on newly completed oil wells from 12.5% to 6.5%. Representative Guymon said the oil-only fiscal note showed roughly an $87,000,000 negative impact over a five-year forecast. - HB 495 (gas exemption): would shorten the horizontal-well exemption period for gas. The package’s gas changes were presented as producing roughly $99,000,000 in additional revenue in the same forecast window, producing a near-net result in the sponsors’ modeling.

Dr. Greg Upton of the LSU Center for Energy Studies, who briefed the committee, explained the interaction: “If you reduce the rate on newly drilled oil wells … that will increase the amount of new oil production. The question is whether that effect is large enough to completely offset the revenue reduction … I’m of the opinion that it’s not large enough. … The other part of the package is the increased taxes on natural gas, in particular horizontal drilling natural gas.”

Lawmakers and local impacts Committee members pressed for details on local (parish) revenue effects. Dr. Upton and others explained that statutory dedications tied to severance collections mean some parishes currently receive capped shares. Dr. Upton said roughly 20 parishes “are approximately at the cap of $1,300,000 that they receive back,” and that reductions in oil severance could lower some parish dedications. He added the fiscal office could estimate parish-level impacts if requested.

Representative Orgeron and others asked for clarifications about effective dates and how the bills apply to wells completed before or after a July 1, 2025 cutover; sponsors said the new lower rate would apply to wells completed after the statutory effective date. Committee materials and amendments also included special, lower rates for low‑production or recently inactive wells to incentivize recompletions.

Committee action and next steps - House Bill 600: Representative Orgeron moved the bill “favorable”; the committee reported HB 600 favorably with no roll-call recorded in the transcript. (Committee minutes show a voice/consensus-style action.) - House Bill 495: an amendment was adopted in committee to set the new exemption rules (e.g., 18 months or payout, for wells completed on or after July 1, 2025). Representative Farnham moved the bill with amendments; the committee reported HB 495 with amendments. - House Bill 518 (technical): the committee reported HB 518 favorably; sponsors said the bill is a germane vehicle to carry administrative or technical changes if negotiations require them.

What supporters say Sponsors and industry representatives described the package as negotiated and as an attempt to balance competitiveness across oil and gas. Guymon said the goal was to “get oil competitive with our neighbors” and to do it without “putting a hundred million dollar hole in our budget.” Industry speakers, including Louisiana Mid-Continent Oil and Gas Association, said they are at the table but also urged careful, predictable rules.

Points raised by critics Several members asked for parish-level projections, and some members expressed caution about lowering a major source of state revenue during uncertain federal economic conditions. Committee witnesses noted the underlying numbers can swing year to year with oil and gas prices and with production changes.

Ending Sponsors said they will continue negotiations as the bills move through the House. “We can always revisit,” Guymon said when asked whether the new rates should be altered later. The committee advanced the package to the next stage of the legislative process so lawmakers can continue work in the House and at conference with Senate members.