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Severance Tax Relief Program

The Severance Tax Relief Program (STRP) allows the suspension or reduction of severance taxes due on production from a qualifying well for a variable time period depending on the category. To review the origin and history of the STRP, please follow this link to our Archives page.

In addition to the incentives below, the Louisiana Department of Revenue also manages other severance tax certifications. Please visit the Department of Revenue website, select "Forms," "Businesses," then "Severance Tax." Information regarding the Department of Revenue's programs are included in the instructions of the downloadable forms.

The Office of Conservation currently certifies applications under this program in two (2) categories:

  1. Deep Well
  2. Horizontal Well

Beginning July 1, 2018 in accordance with Act 421 of the 2017 Legislative Session, the Office of Conservation will begin accepting applications for the new Inactive Well and Orphan Well reduced rate incentive programs. Please note that these new reduced rate programs have perforation limitations.

The guidance memorandum for the new reduced rate incentive programs can be found here.

Applications received on or after August 1, 2015 will be charged a $504 fee. The fee will be for each qualifying period of the wellbore, not per application. Please follow this link for more information regarding fee and rule changes.


DEEP WELL REQUIREMENTS**

Note: Wells sidetracked below 15,000 feet TVD from which production commenced after July 31, 1994 in the sidetrack hole are also eligible; however, the only costs allowed are those associated with the sidetrack.

**Eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

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HORIZONTAL WELL REQUIREMENTS**

Note: Horizontal recompletions are defined as horizontal drilling in an existing well bore. Horizontal recompletion costs are limited to only those costs associated with the horizontal portion of the well bore. Extensions of existing horizontal well bores in the same sand are not considered horizontal recompletions.

**Eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

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INACTIVE WELL WITH SIMILAR PERFORATIONS REQUIREMENTS**

  • Form STRP-IA
  • >> The well must have thirty days or less production for two consecutive years during the qualifying period.
  • >> Production qualifying for the reduced inactive severance tax rate must be from the same or within 100' of the top or bottom perforations of the last producing interval for lease wells, and from the defined interval of the last producing interval for unit wells.
  • >> Return to production date must be after August 1, 2017.

**Eligible for a 50% reduction in severance tax for a period of ten years within the qualified producing interval. The reduced inactive severance tax rate will begin on the date of first production after the qualifying period or 90 days after the application is received in the Office of Conservation, whichever comes first.

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ORPHAN WELL WITH SIMILAR PERFORATIONS REQUIREMENTS**

  • Form STRP-OW
  • >> Well must be designated as an orphaned well continuously for a period of five years or more, ending between August 1, 2017 and June 30, 2023.
  • >> Production qualifying for the reduced orphan severance tax rate must be from the same or within 100' of the top or bottom perforations of the last producing interval for lease wells, and from the defined interval of the last producing interval for unit wells.
  • >> Return to production date must be after August 1, 2017.

**Eligible for a 75% reduction in severance tax for a period of ten years within the qualified producing interval. The reduced orphan severance tax rate will begin on the date of first production after the qualifying period or 90 days after the application is received in the Office of Conservation, whichever comes first.

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WELL COST STATEMENT

  • Form STRP-WCS
  • A well cost statement must accompany every STRP application for Deep Well and Horizontal Well categories. This cost statement includes a detailed itemized listing of the actual costs to drill, complete, and equip the well for production. No AFE or estimated costs are allowed. Applicants are encouraged to hold the filing of applications until they have a firm cost figure. Applicants are allowed to collect, retroactively, any severance taxes paid back to the date of first production on a qualifying well.

    Costs such as building a board road, preparing the location, logging, cement, drill bits, pipe, labor, 3-D seismic*, etc. can be included on the cost statement. The cost to build a flowline to a facility and any new equipment needed to hook the well up to the facility can also be included; however, the cost of an existing facility is not eligible and a newly constructed facility's cost must be prorated to the number of wells it is designed to serve. Lease-related costs, legal fees, hearing costs, saltwater disposal wells, title searches, etc. are examples of costs that are not allowed on the cost statement.

    *The 3-D seismic cost requested on Form STRP-3D must be included in the cost statement as a line item and included in the total cost shown on forms STRP-DW (Deep Well) and STRP-HW (Horizontal Well).

    Applications claiming 3-D seismic costs must include Form STRP 3-D and a map depicting the footprint of the seismic area showing the wells that benifited from the seismic.

    Any questions regarding any STRP should be directed to the Permit and Reservoir Section Manager.

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