Louisiana and Texas Severance Tax Legislation Changes: What You Need to Know

Recent severance tax developments in Louisiana could create meaningful savings opportunities for oil and gas operators, but taking advantage of them requires careful attention to qualification and filing requirements. In Louisiana, the horizontal well exemption continues to provide significant tax relief, with third-party CPA certification playing an important role in the application process.

Louisiana Horizontal Well Exemptions: Third-Party CPA Certification Required

Louisiana’s horizontal well exemption continues to be one of the state’s most valuable severance tax incentives for oil and gas operators. Depending on the commodity produced, qualifying wells can receive a substantial reduction in severance tax during the exemption period, making it important for operators to understand both the tax savings available and the application requirements.

The table below highlights the current severance tax treatment for qualifying horizontal wells.

* Current rates are based on the annual calculations published by the Louisiana Department of Revenue.
** The horizontal gas exemption currently results in a 100% severance tax exemption during the applicable exemption period.

While the tax savings can be significant, one of the most important steps in the exemption process is the required certification by an independent third-party CPA.

Operators applying for the horizontal well exemption must include an agreed-upon procedures report performed by an independent CPA. The CPA reviews the qualifying drilling and completion costs, completes the required Well Cost Statement Certification and provides the report that accompanies the exemption package submitted to the Louisiana Department of Energy and Natural Resources.

Another important requirement that is often overlooked is that the agreed-upon procedures must be performed by a CPA firm licensed in Louisiana. Operators working with an out-of-state accounting firm should confirm that the firm meets Louisiana’s licensing requirements before beginning the certification process. Addressing this requirement early can help avoid unnecessary delays when the exemption package is ready for submission.

The agreed-upon procedures engagement generally includes reviewing qualifying drilling and completion costs, reconciling those costs to the operator’s accounting records and supporting documentation, completing the Well Cost Statement Certification and issuing the report required as part of the exemption application. Because gathering invoices, joint interest billings and other supporting documentation can take time, operators should begin the certification process well before filing the exemption package.

Current exemption periods remain unchanged. Horizontal oil wells continue to qualify for a 24-month exemption period, while horizontal natural gas wells qualify for an 18-month exemption period. With qualifying oil production currently taxed at an effective rate of 1.3% instead of 6.5%, and qualifying horizontal gas wells currently receiving a full severance tax exemption during the exemption period, completing the CPA certification process in a timely manner can have a meaningful impact on project economics and cash flow.

Texas: New Exemption for Restimulated Wells

On June 20, 2025, the governor signed House Bill 3159 into law, establishing a new severance tax exemption for oil and gas produced from restimulated wells in Texas. This applies to wells that were previously active, went inactive (with no reported production for 12 consecutive months or more) and have since been brought back online. To qualify, the well must have produced for at least 60 months prior to becoming inactive and cannot be part of an ongoing enhanced recovery project or a well that was drilled but never completed.

The exemption offers up to 36 months of severance tax relief or until the cost of the restimulation, which is capped at $750,000, is recovered in tax savings, whichever occurs first. Like other Texas severance tax exemptions, the well must be certified by the Railroad Commission of Texas and then approved by the Texas Comptroller. This incentive will apply to oil and gas production beginning January 1, 2026.

Weaver Can Help

If you’re evaluating how these changes might affect your operations on drilling new wells or reviving older ones, now is the time to plan ahead. Weaver’s tax team can help with guidance on filing, deductions or compliance strategies. Contact us today.

Authored by Mayur Naik and Tanner Owens

©2026

This article has been updated to reflect recent developments and provide additional insight into Louisiana severance tax incentives and exemption requirements.