Turn back the clock to 1921. That’s when Louisiana adopted its basic method for taxing oil and gas, a method still in use today.
Bread cost 12 cents a loaf and gasoline was 10 cents a gallon. Louisiana saw an oil boom with wells gushing and refineries and pipelines being built to process this new resource.
State and industry officials devised a severance tax to capture this newfound wealth for state government.
Then, 90 percent of the oil and gas in Louisiana was produced in-state, and the severance tax targeted this production.
Today, more than 90 percent of the oil and gas we process comes from other states and countries and the Gulf of Mexico. Because we still tax only in-state production, this imported oil is untouched.
Why does Louisiana rely on a 1921 tax? I have asked that question since the 1990s, first as a state senator and now as a public service commissioner. The industry says it will leave Louisiana if we change how we tax it.
Can oil companies move the Mississippi River that carries the giant tankers to Baton Rouge? Can they relocate their refineries and 40,000 miles of pipeline? Will another state accept the pollution?
Oil companies go where the oil is, and there are huge new discoveries in the Gulf of Mexico. In August, The Wall Street Journal described an ExxonMobil find south of Lake Charles as “the largest discovery ever in the Gulf of Mexico” with 1 billion barrels of oil. Weeks later Chevron said its Moccasin field in the same area could contain “hundreds of millions of barrels” of oil and gas.
These disclosures contradict oil lobbyists who say the companies will leave Louisiana. They won’t leave until the oil is gone.
My alternative to the 1921 severance tax would benefit the state economy and every resident. My oil-processing tax would replace the severance tax with a tax on all oil and gas processed in Louisiana, regardless of origin.
It would generate enough revenue to replace the state income tax, putting us in line with prosperous states such as Texas and Florida.
Best of all, as a constitutional amendment, the processing tax would be voted on by the people — if the Legislature will let us decide.
I am happy that companies are finding new oil in the Gulf and providing jobs. But their offshore activity has worsened coastal erosion, and no one has sought damages. While they profit, Louisiana fights Mississippi for last place in education, income and environmental health.
Louisiana should be the most progressive state in the South. Our 1921 tax system is holding us back. Our politicians must represent the people and stop pandering to big oil companies.
public service commissioner