Current through Register Vol. 50, No. 9, September 20, 2024
A. Definitions
Allocation of Value- inasmuch as oil and/or
condensate is accounted for on a lease basis, rather than on an individual well
basis, the gross value received for runs from a lease shall be allocated to the
wells within the lease on the basis of the pro rata barrels run from each well;
it being the intent of this Section to apportion value received to all
producing wells in a lease without regard to the tax rate applicable to each
well.
Condensate- liquid hydrocarbons, other than
natural or casinghead gasoline, referred to as condensate, distillate or other
natural resources, which will remain in a liquid state, under atmospheric
conditions of pressure and temperature, recovered by ordinary production
methods from a gas well as classified by the Office of Conservation. This also
includes liquid hydrocarbons recovered from separators or scrubbers situated at
inlets to plants, compressors, dehydrators, and metering stations.
Department- the Department of
Revenue.
Gas- gaseous phase hydrocarbons recovered by
separation from either an oil well or gas well.
Gas Tax Rate- the gas tax rate as adjusted
annually in accordance with
R.S.
47:633(9)(i) will be rounded
to the nearest 1/10 of 1 cent. When rounding, if the fourth decimal digit is
five or greater, the rate shall be rounded up to the nearest tenth; if the
fourth decimal digit is less than five, the rate shall be rounded down to the
nearest tenth.
Incapable Gas Well- a well classified by the
Office of Conservation as a gas well which has been determined by the secretary
to be incapable of producing an average of 250,000 cubic feet of gas per day,
under operating conditions, throughout the entire taxable month.
Low Pressure Oil Well- a well classified by
the Office of Conservation as an oil well which has been determined by the
secretary to have a wellhead pressure of 50 pounds per square inch gauge or
less, under operating conditions, whether it be tubing flow or casing flow,
throughout the entire taxable month. An oil well producing oil by any
artificial method, such as gas lift, pumping or hydraulic lift shall be
presumed, in the absence of a determination to the contrary by the secretary,
to have a wellhead pressure of 50 pounds per square inch gauge or less under
operating conditions.
Natural Gas Liquids - natural gas
liquids, butane, propane, ethane and methane extracted as the result
of additional processes employed in the mechanical processes as outlined in
§2903 ANatural or Casinghead
Gasoline.
Natural or Casinghead Gasoline- liquid
hydrocarbons recovered from gas (subsequent to the ultimate separation and/or
scrubbing of the gas stream) by specifically applied mechanical processes of
absorption, adsorption, compression cooling, cryogenics and refrigeration to
the entire volume of gas from which these liquid hydrocarbons
are recovered. This includes liquid hydrocarbons recovered from hydrex and HRU
units.
Oil- liquid hydrocarbons recovered by
initial separation from a well classified as an oil well by the Office of
Conservation.
Payout-the payout of the well cost for a
horizontal well as referred to in
R.S.
47:633(7)(c)(iii), a deep
well as referred to in
R.S.
47:633(9)(d)(v), and a new
discovery well as referred to in
R.S.
47:648.3 occurs when gross revenue from the
well, less royalties and operating costs directly attributable to the well,
equals the well cost as approved by the Office of Conservation. Operating costs
are limited to those costs directly attributable to the operation of the exempt
well, such as direct materials, supplies, fuel, direct labor, contract labor or
services, repairs, maintenance, property taxes, insurance, depreciation, and
any other costs that can be directly attributed to the operation of the well.
Operating costs do not include any costs that were included in the well cost
approved by the Office of Conservation.
Secretary- the Secretary of the Department
of Revenue.
Stripper Field- a field in which all crude
oil production is from certified stripper oil wells.
Value- with respect to oil and/or
condensate, the value shall be the higher of the gross receipts received from
the first purchaser by the producer or the posted field price.
a.
Gross Receipts- the total
amount of payment:
i. received from the first
purchaser in an arm's length transaction; or
ii. received from the first purchaser or
transferred from the first purchaser by recognized accounting methodology, in a
non-arm's length transaction. Gross receipts shall include bonus or premium
payments when made by the purchaser to the owner, all advanced payments, and
any other thing of value such as exchanges, barter, or reimbursement of costs.
Advanced payments are not taxable until the oil and/or condensate for which
such payments are made are actually severed and delivered to the
purchaser.
b.
Posted Field Price- a statement of crude oil prices circulated
among buyers and sellers of crude petroleum and is generally known by buyers
and sellers within the field as being the posted price. The posted field price
is the actual price of crude petroleum advertised for a field. The area price
is a statement of crude oil prices circulated among buyers and sellers of crude
petroleum listing prices for different areas of the state, usually listed as
north Louisiana and south Louisiana, and generally known among buyers and
sellers within the area as the posted price. This area price is the beginning
price for crude petroleum of an area before adjustments for kind and quality
(including, but not limited to, gravity adjustments) of the crude petroleum.
When no actual posted field price is advertised or issued by a purchaser, the
area price less adjustments for kind or quality (including, but not limited to,
gravity adjustments) becomes the posted field price.
c.
Arm's Length Transaction-
a contract or agreement that has been arrived at in the open market place
between independent and nonaffiliated parties with opposing economic
interests.
d.
Non-Arm's
Length Transaction- a contract or agreement between subsidiaries
and/or related parties and/or affiliates.
e.
Value in Arm's Length
Transaction- in an arm's length transaction, the value shall be the
gross receipts of all things of value received directly or indirectly by the
producer.
f.
Value in
Non-Arm's Length Transaction- in a non-arm's length transaction, the
value shall be derived by taking the following into consideration:
i. the gross receipts of all things of value
received directly or indirectly by the producer;
ii. if the producer or a subsidiary, related
party, or an affiliate of the producer, is the purchaser, look to the gross
proceeds from contemporaneous arm's length transactions by such purchaser for
the purchase of significant quantities of like quality oil or condensate in the
same field, or if necessary, the same area;
iii. the prices paid by independent and
nonaffiliated parties for significant quantities of like quality oil or
condensate produced in the same field or, if necessary, the same area;
and
iv. other relevant information,
including information submitted by the producer concerning the unique
circumstances of producer's operations, product or market.
g. The secretary, in the absence of
supporting documentation or arm's length transaction, may adjust a producer's
reported value to conform with the above mentioned standards.
h.
Transportation Costs-
there shall be deducted from the value determined under the foregoing
provisions the charges for trucking, barging, and pipeline fees actually
charged the producer. In the event the producer transports the oil and/or
condensate by his own facilities, $0.25 per barrel shall be deemed to be a
reasonable charge for transportation and may be deducted from the value
computed under the foregoing provisions. The producer can deduct either the
$0.25 per barrel or actual transportation charges billed by third parties but
not both. Should it become apparent the $0.25 per barrel charge is inequitable
or unreasonable, the secretary may prospectively redetermine the transportation
charge to be allowed when the producer transports the oil and/or condensate in
his own facilities.
B.
Certification for Reduced Tax Rates. A taxpayer may qualify for the lesser tax
rates levied in
R.S.
47:633(7)(b) and (c), and
R.S.
47:633(9) by certifying and
reporting production and test data, on forms prescribed by the secretary.
1. Oil. Oil production is certified for
reduced severance tax rates provided by
R.S.
47:633(7)(b) or (c)(i)(aa)
by individual well. To receive the reduced tax rate on the crude oil production
from an oil well, an application must be filed with the secretary on or before
the twenty-fifth day of the second month following the month in which
production subject to the reduced rate applies.
a. After a well has been certified for the
reduced tax rate, it is necessary to file continuing certification forms on or
before the twenty-fifth day of the second month following the months of
production.
i. It is not necessary to include
stripper wells that are certified with a "B" prefix code on the continuing
certification forms.
ii. Failure to
file or delinquent filing of the continuing certification forms may result in
certification denial for the month's production that the report is delinquent
or not filed.
b. Wells
cannot be certified as both a stripper and an incapable oil well.
c. Recertification is required whenever the
well operator changes.
d. All wells
are subject to redetermination of their reduced rate status based on reports
filed with the Department and the Office of Conservation. When a well no longer
meets the qualifications for the reduced tax rate for which it was certified,
the full tax rate becomes due.
2. Gas. Gas production is certified for
reduced severance tax rates provided by
R.S.
47:633(9)(b) and (c) by
individual wells. To receive the reduced severance tax rate on natural gas or
casinghead gas production, an application must be filed with the secretary on
or before the twenty-fifth day of the second month following the month in which
production occurs.
a. After a well has been
certified for the reduced tax rate, it is necessary to file continuing
certification forms on or before the twenty-fifth day of the second month
following the month of production.
i. It is
not necessary to include incapable gas wells that are certified with an "F"
prefix code on the continuing certification forms.
ii. Failure to file or delinquent filing of
the continuing certification forms may result in certification denial for the
month's production that the report is delinquent or not filed.
b. The well cannot be certified as
both an incapable gas well and an incapable oil well.
c. If the well changes from one tax rate
status to another a new certification is required.
d. Recertification is required whenever the
well operator changes.
e. All wells
are subject to redetermination of their reduced rate status based on reports
filed with the Department and the Office of Conservation. When a well no longer
meets the qualifications for the reduced tax rate for which it was certified,
the full tax rate becomes due.
C. Determination of Taxable Volume-Liquids.
It is the duty of the severer to measure the volume of oil, condensate or
similar natural resources immediately upon severance or as soon thereafter as
these hydrocarbons come into being in the form on which the tax is imposed.
1. In any arm's length transaction involving
oil, condensate or similar natural resources individually or in a commingled
combination, the method of measurement utilized by the first purchaser and the
seller for determining the total volume involved and the volumes applicable to
the properties involved is acceptable and may be used for the determination of
the volumes to which the appropriate tax rates apply.
2. In the absence of an arm's length
transaction or for any other reason where the secretary deems that the method
of measurement is prejudicial to the state's best interests, he shall prescribe
an acceptable method of measurement.
3. When liquid hydrocarbons bearing various
tax rates are commingled without proper prior measurement as prescribed below,
the entire commingled volume shall be taxed at the highest tax rate applicable
to any oil or condensate present in the commingled volume.
4. Proper measurement prior to commingling
oil and condensate shall be as outlined below.
a. Stock Tank Measurement. When oil,
condensate or similar natural resources are produced into stock tanks, the
tanks shall be strapped on a 100 percent basis. All measurements, gravity
determination, temperature corrections to 60°F, and determinations of basic
sediment and water (BS and W) shall be made in accordance with procedures
outlined in the latest American Petroleum Institute (API) code covering
measuring, sampling, testing of crude oil, and the American Society for Testing
Materials-Institute of Petroleum (ASTM-IP) petroleum measurement
tables.
b. Liquid Metering Devices.
When oil and condensate are not stock tank measured but must be measured at
pressures above atmospheric pressure, such liquids shall be measured by means
of a liquid metering device. The meter shall be calibrated at least once every
90 days and records of calibration and all other pertinent test results shall
be kept on file for the same period of time as the prescriptive period relative
to taxes and must be available for examination by representatives of the
department. The taxpayer may pay tax on the metered volume or allocated meter
volume at the meter measurement pressure corrected to 60°F. When a flash factor
is required to convert the volume at the meter measurement pressure to the
volume at atmospheric pressure, the flash factor may be obtained by either
utilizing the equilibrium vaporization flash calculation method or the
differential vaporization process.
c. Well Tests. When crude oil and/or
condensate are not stock tank measured or measured by liquid measuring devices,
the use of well tests, split stream tests, full stream tests or other
acceptable and recognized methods of determining the liquid volume of full well
stream shall be employed as a measurement device for allocation
purposes.
5. When oil
and/or condensate are commingled with a liquid hydrocarbon bearing a lesser tax
rate, the oil and/or
condensate shall be taxed on the basis of
value received for the entire commingled product.
a. When oil and/or condensate bearing various
tax rates are commingled prior to separate measurement, the commingled volume
shall be taxed at the highest tax rate applicable to any oil or condensate
present in the commingled volume. The separate measurement requirement is met
when one of the products is properly measured prior to commingling.
D. Determination of
Taxable Volume-Gas. It is the duty of the severer to measure the volume of gas
immediately upon severance or as soon thereafter as the substance comes into
being in the form on which the tax is imposed.
1. Gas produced from an individual gas well,
regardless of whether the well is capable or incapable, shall be measured by
means of a meter or well tests acceptable to the secretary. Metering may be
accomplished by the backout method, whereby the volume produced by one of two
or more wells may be ascertained by subtracting from the combined metered
volume the measured volumes from the rest of the wells. All measurements shall
be made at a pressure base of 15.025 pounds per square inch absolute and at a
temperature of 60°F with corrections made for deviations from Boyle's law when
measurement pressures exceed 200 pounds per square inch gauge.
2. Gas produced from individual oil wells may
be determined by an allocation of the total metered volume based on gas/oil
ratios or solution oil ratios acceptable to the secretary. Records pertaining
to volume determinations shall be kept on file for examination and verification
by representatives of the secretary.
3. When gas volumes bearing various tax rates
are commingled, the volumes bearing each different tax rate must be determined
prior to commingling as outlined in
§2903. D.1 When such
commingling occurs and it is determined by the secretary or his representative
that the prescribed measurement requirements have not been met, the entire
commingled volume shall be taxed at the highest rate applicable to any gas
present in the commingled volume.
E. Application of the Tax on Gas. All gas
other than gas expressly exempted from the tax under the provisions of R.S.
47:633.9 is subject to the tax. The determination of whether gas lift gas is
taxable or exempt shall be made in the same manner as formation gas.
1. Gross gas production shall be an
accumulation of the total dispositions of formation gas from a well and/or
lease. Gas exhausted from a gas lift installation, commonly called "re-cycled
gas," and commingled with formation gas shall not be included in the volume of
gas produced from the underground formation. Dispositions shall include, by way
of illustration but not by way of limitation, gas used for field operations,
within or without the field, gas vented into the atmosphere, gas used elsewhere
for gas lift, gasoline and natural gas liquids extracted (which must be
converted to gas), and gas delivered to a processing plant, sales or
deliveries.
2. Gas which has not
previously borne tax or been subject to tax shall not be allowed as an
exclusion or tax credit upon injection, but will be allowed as an exclusion
when ultimately reproduced. Thus, gas produced in another state or in federal
offshore areas would not qualify for an exclusion or tax credit upon injection
into the formation in the state of Louisiana.
3. Gas which has previously been allowed as
an exclusion or tax credit at the time of injection shall be taxed at the time
of reproduction, notwithstanding the fact that it may have been originally
produced outside the state.
4. Gas
produced without the state of Louisiana which has been injected into the earth
in the state of Louisiana will be allowed as an exemption to the extent that
the exemption will not exceed the production from the same formation. Adequate
records must be maintained by the taxpayer so as to identify the nontax paid
injected gas at the time of reproduction and qualify for the
exclusion.
5. A credit claimed by a
taxpayer on gas injected into a formation in the state of Louisiana will be
limited to any gas severance tax liability imposed against him during the same
period for gas produced by him. Credit shall not be allowed against taxes owed
in taxable periods subsequent to that in which the credit occurred. A taxpayer
claiming this credit will be required to submit a worksheet detailing the
source of gas by company, parish, field and lease comprising the volume on
which the credit is claimed.
6.
When capable and incapable gas volumes are commingled and gas is subsequently
withdrawn from the commingled mass and used for a purpose which makes the gas
exempt from the severance tax, it will be presumed that the ratio of the
volumes of capable and incapable gas remaining in the commingled mass will be
in the same ratio as before withdrawal.
7. Carbon Black
a. Carbon black exclusions may be allocated
to leases on a contractual basis; provided, however, that such gas is
physically capable of being consumed as carbon black. In the absence of
contractual limitations, the allocation of plant fuel and carbon black shall be
on an equitable and reasonable basis.
b. Whenever sales and/or deliveries are made
for plant fuel and/or carbon black usage the consumer of such plant fuel and
the transporter or seller of the gas used for carbon black shall be required to
submit a report monthly to the department showing 100 percent entries into its
gas streams involved and an allocation of the plant fuel and/or carbon black
usage withdrawn from the stream back to the sources entering the commingled
mass.
8. Drip Points
a. No additional severance tax is due on
scrubber liquids recovered subsequent to a point at which the gas severance tax
has been paid, provided, however, such recovery has been made from a pipeline
gas stream owned and operated by someone other than the producer of the gas and
the scrubber liquids are recovered after the gas has changed ownership, and the
producer receives no further thing of value for the resource entering the
pipeline.
b. When severance tax is
due and paid on scrubber liquids, natural and/or casinghead gasoline recovered
from gas subsequent to a point at which the gas severance tax on the gas has
been previously paid, a credit will be given for the gas shrinkage volume
resulting from the recovery of these scrubber liquids and/or natural and
casinghead gasoline. This gas severance tax credit shall be made on an actual
vapor equivalent or at 1,260 cubic feet of gas per barrel of liquid
recovered.
9. Gas used
or consumed as fuel in the operation of a recycling or gasoline plant for
purposes other than the production of natural resources in the state of
Louisiana shall not be exempt from the tax. The extraction or fractionation of
liquefied petroleum gases (LPG) or natural or casinghead gasoline does not
constitute production of natural resources.
F. Exclusions from the Gas Severance Tax
1. Gas injected into the formation in the
state of Louisiana.
2. Gas produced
without the state of Louisiana which has been injected into the earth in the
state of Louisiana.
3. Gas vented
or flared from oil and gas wells provided such gas is not otherwise sold. There
shall be no exclusion allowed for gas flared at gasoline or recycling plants if
such gas is attributable to raw gas volumes which are sold by the producer
prior to plant processing.
4. Gas
used for fuel in connection with the operation and development for or
production of oil and gas in the field where produced, provided such gas is not
otherwise sold; and gas used for drilling fuel in the field where produced even
though sold for that purpose.
5.
Gas used in the manufacture of carbon black.
6. Gas attributable to United States
government royalty.
7. Gas
accounted for as measurement differences.
G. Reports and Returns
1. All returns and reports shall be made on
forms prescribed by the secretary or on forms substantially similar which have
been approved for use by the secretary. Returns and reports shall be completed
and filed in accordance with instructions issued by the secretary.
2. The secretary is empowered to require any
person engaged in severing natural resources, or any other person held liable
for severance taxes, to furnish necessary information pertaining thereto for
the proper enforcement, and verification of taxes levied in
R.S.
47:631 et seq.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
47:633, 47:648.3, and
47:1511.
