Don Briggs, president of the Louisiana Oil and Gas Association, [recently accused] the Louisiana Tax Commission (LTC) of “doubling” oil and gas property tax assessments for 2011 as compared to 2010. [The charge] is needlessly inflammatory and … downright false or misleading.
Briggs insinuates the cost of lateral sections of horizontal wells should be excluded from property tax assessment of subsurface oil and gas property per the LTC’s Rules and Regulations. He asserts that an LTC rule change to include in assessed value certain improvements and equipment used to drill horizontal wells is “unfair and unreasonable.” He further purports this rule change will cause a “mass exodus” of oil and gas companies from Louisiana.
The fact is that the cost of the lateral segment of a horizontal well represents equipment and improvements, including installation thereof, that are fully and legally taxable under the laws of the state. Operators of conventionally drilled wells (vertical only) pay property taxes based on the exact same type of costs and equipment. What makes horizontal wells any different?
It should be noted that the LTC’s new rule raised the 2011 schedule cost values for oil and gas properties by just over 4 percent from 2010. Also, the depreciation schedule adopted by the LTC for 2011 effectively wipes out the increase in schedule value for existing properties. It should not be overlooked in this discussion that the LTC’s adopted schedule values are less than half of actual total costs.
Assessors do not have the power to change tax laws and must apply them as written. The primary goal of all assessors is to assure that we have a fair and equitable tax system with no preferential treatment.
Industry spokesmen would have you believe this LTC rule change for 2011 will cause a doom and gloom situation, even accusing the LTC of hampering the Louisiana Department of Economic Development and the governor in their efforts to attract business to the state. According to an article published by the LSU Center for Energy Studies in the Oil & Gas Journal trade magazine, Louisiana was among the lowest of all states in terms of property tax burden on the oil and gas industry. Still, oil and gas companies aggressively seek preferential property tax relief during the LTC’s annual Rules and Regulations public hearings.
Taxes are a legitimate and typically minor cost of business no matter where you live. To afford transparency and credibility, we would encourage the LTC, LAA, tax recipient bodies, and industry to join in supporting legislative action in 2011 that would require all LTC Rules and Regulations hearings to be held at the State Capitol and broadcast live on the state’s network as is the case for legislative meetings.
Robert R. Gravolet,
LAA Oil & Gas Committee Chair