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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 Five (5) categories:

  1. Deep Well - DW
  2. Horizontal Well - HW
  3. Orphan Well Rework - OR
  4. Inactive Well with Similar Perforations
  5. Orphan Well with Similar Perforations

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. Re-entries of p&a wellbores qualify if the well is drilled deeper than the original or sidetracked below 15,000 feet TVD.

**Eligible for a two-year exemption from the date of commercial production or until payout of qualified costs, whichever comes first. Act 431 of 2023 Legislative Session clarifies that first production should be commercial production date, which could be after initial completion date.

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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 reduction in severance taxes from the date of first production or until payout of qualified costs, whichever comes first. In 2015, the full tax exemption was replaced with a tier system relative to the price of oil and gas. See summary here. The first reduced period is in effect July 1, 2022 through June 1, 2023 as reported in the Louisiana Department of Revenue's July 18, 2022 Revenue Information Bulletin No. 22-014.

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ORPHAN WELL REWORK PROGRAM**

  • Form STRP-OR - pending - submit letter request

See the guidance memorandum for information regarding the Orphan Well rework incentive per Act 391 of the 2021 Legislative Session.

**Eligible for a three-month severance tax exemption following a qualifying workover of a formerly orphaned well.

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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 July 1, 2018.

See the guidance memorandum for information regarding the Inactive Well with similar perforations incentive per Act 695 of the 2024 Legislative Session.

**Eligible for a 25% 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 July 1, 2018.

See the guidance memorandum for information regarding the Inactive Well with similar perforations incentive per Act 695 of the 2024 Legislative Session.

**Eligible for a 12.5% 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

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.

WELL COST STATEMENT CERTIFICATION

Per Act No. 18 of the 2024 Third Extraordinary Session, effective December 4, 2024, the Well Cost statement shall contain an opinion from a qualified accountant who is unrelated to the operator that the well cost statement presents fairly in all material aspects, the costs expended to complete the well.

The Act states that the Well Cost Statement Shall:

  1. Be performed in accordance with the accounting standards generally accepted in the United States.
  2. Be addressed to the party which has engaged the qualified accountant with a copy addressed to the operator.
  3. Contain the qualified accountant’s name, address, and telephone number.
  4. Contain a certification that the qualified accountant is unrelated to the operator.
  5. Be dated as of the date of completion of the qualified accountant’s field work.
  6. Contain a statement of acknowledgment by the qualified accountant that the state is relying on the well cost statement in the allowance of an exemption under the provisions of this Section.

The Act defines a qualified accountant as a certified public accountant (CPA) who meets all of the following qualifications:

  1. Maintain an active, unrestricted, original, certified public accountant license.
  2. Maintains a current Louisiana certified public accountant firm permit.
  3. Actively participates in a Peer Review Program approved by the State Board of Certified Public Accountants of Louisiana.

Well Cost Statement Certification Form

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

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