Louisiana voters tomorrow will consider adding a tax break to the state’s constitution to exempt some of the equipment used by the offshore oil and gas industry, Kallanish Energy reports.
At issue is property that companies say is being stored on land for use in the Gulf of Mexico’s outer continental shelf (OCS). The OCS is outside the jurisdiction of the state or any parish.
Amendment 1 would grant a property tax exemption on goods stored in Louisiana warehouses ultimately destined for use in the OCS, clarifying an ambiguous portion of the state tax code, supporters say.
But skeptics worry about adding another tax break to the state’s already convoluted system and say the ambiguity should be settled in court, The Center Square reported.
Historically, those materials have not been subject to property tax because they were considered exempt under the U.S. Constitution’s interstate commerce clause, Tyler Gray, president and general counsel of the Louisiana Mid-Continent Oil and Gas Association, told The Center Square.
But during the past two years, he said, some coastal parishes began seeking to tax that property, arguing it’s not exempt if it comes to rest long enough.
“You can’t tax property that’s in interstate commerce,” Gray contends. “It’s not a length-of-time argument; it’s a destination argument.”
Gray adds that it isn’t practical to expect companies to store, for example, replacement parts for an offshore oil rig on the rig itself. He says “millions” of dollars are at stake for the industry.
Wendy Thibodeaux is the assessor for Lafourche Parish, a coastal parish that is home to Port Fourchon. She told The Center Square the change would cost the parish at least $1.6 million to $3 million annually it can’t afford to lose. But the bigger concern is companies might abuse the exemption because assessors have no way to verify whether equipment truly is being used offshore.
Assessments are based on the “honor system,” Thibodeaux said. Recently, her office took a closer look at the practice and found some property owners seemed to have a loose interpretation of what being OCS-bound means. In one case, equipment had been sitting dockside for 20 years, she said.
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