Constitutional Amendment 2 Would Bring Fairness, Predictability to Oil and Gas Well Assessment Process
A ‘yes’ on Constitutional Amendment 2 would bring fairness and accuracy to the assessment process for Louisiana’s oil and gas wells, assessor and industry representatives agree.
Although there are three ways to assess property, (those methods are the ‘cost,’ ‘market’ and ‘income’ methods) the state constitution only includes the use of two for oil and gas wells in Louisiana. CA-2 would include the income approach as the third methodology to value oil and gas wells for property assessment. The income approach values wells based on their ability to produce revenue.
Constitutional Amendment 2:
• CA-2 received bipartisan, unanimous support in the legislature as HB 360.
• CA-2 would result in more accurate assessments of oil and gas wells, while also allowing better predictability of tax revenue.
• CA-2 is supported by assessors and the oil and natural gas industry.
• CA-2 would make the income approach available to the Louisiana Tax Commission. It does not mandate its use.
• CA-2 would only affect the valuation of oil and gas wells, and will not change the assessment of other types of property.
• An amendment is necessary because of the restrictive language in the state constitution prohibiting the use of all three valuation methods for the assessment of oil and gas wells.
“Amendment No. 2 is the result of a joint effort of the Assessors and the oil and gas industry, and it is supported by both,” said Belinda Hazel, Plaquemines Parish Assessor and Louisiana Assessors Association Chair of the Oil and Gas Committee. “The passage of Amendment No. 2 is necessary to achieve our unified goal, which is the fair and accurate assessment of oil and gas wells.”
“This income approach is the same method used when wells are valued for sale on the open market,” said Daron Fredrickson, LOGA Tax Committee Chairman. “It’s common sense that this valuation method should be available for property assessment purposes as well.”
“The oil and natural gas industry is the backbone of Louisiana’s economy providing jobs and economic benefits throughout our state,” said Tyler Gray, Chair of the Louisiana Taxpayer Protection PAC. “Fair and competitive tax policies at the state level are critical to the economic health of our state.”
“This amendment brings a fairness to the assessment process for the oil and gas industry, 90% of which consists of small businesses,” said Mike Moncla, Interim President for the Louisiana Oil & Gas Association. “When independent operators can reliably predict their costs, they can allocate more to supporting and expanding their workforce. Fairness and predicability lead to more investment.”
“When this amendment was a bill, HB 360 breezed through the House committee, it breezed through the House floor, it breezed through the Senate committee, and it breezed through the Senate floor,” Representative Mike Huval said. “It was just a matter of educating all my colleagues in the legislature that all parties affected, both in industry and at the assessors association, agreed that this was a fairer way going forward to assess the value of a producing oil and gas well.”
The Louisiana Oil & Gas Association was organized in 1992 to represent the Independent and service sectors of the oil and gas industry in Louisiana; this representation includes exploration, production and oilfield services. LOGA’s primary goal is to provide our industry with a working environment that will enhance the industry. •