Once a year, Louisiana and New Mexico quietly reset their severance tax rates — and operators who miss the update risk filing at the wrong rate for months before anyone catches it.
Here is what you need to know about the changes for 2026/2027.
Louisiana: A Formula, Not a Guess
Louisiana’s natural gas severance tax isn’t set by legislative vote each year — it’s calculated. Per LDR Revenue Information Bulletin 26-013, the rate effective July 1, 2026 through June 30, 2027 is 15.14¢/MCF, up sharply from 10.52¢ the prior fiscal year. The formula multiplies a fixed 7¢/MCF base rate by a “gas base rate adjustment” — the ratio of the average NYMEX Henry Hub settlement price (12 months ending March 31) to a fixed 1990 baseline of $1.7446/MMBTU. When Henry Hub prices climb, so does your effective rate — automatically, with no legislative action required.
Oil severance stays tiered by well classification: 6.5% full rate on wells completed after July 1, 2025 (versus 12.5% on older completions), 6.25% for certified incapable wells, and 3.125% for certified stripper wells. Stripper wells also carry a price-based exemption — no severance tax is owed in any month where the average oil value falls below the statutory threshold, currently extended through mid-2029. Reduced rates apply as well to inactive and orphan wells, layered by when production began. Don’t overlook the Oilfield Site Restoration Fee, which rides alongside severance tax and adjusts annually based on Henry Hub pricing too.
New Mexico: A Different Trigger Entirely
New Mexico’s Oil and Gas Conservation Tax doesn’t track commodity prices directly — it tracks the balance in the Oil and Gas Reclamation Fund, with a statutory WTI price threshold layered on top. Historically, the rate has stepped between 0.18% and 0.19%, with legislation allowing increases up to 0.24% when average quarterly WTI exceeds $70/barrel. TRD has not yet published the rate effective September 1, 2026 just yet. Operators in the Permian and San Juan basins should watch for that bulletin closely, since it applies on top of the flat 3.75% Oil and Gas Severance Tax and the 3.15%/4% Emergency School Tax.
Your Compliance Checklist:
- Reconfirm that well certifications (stripper, incapable, inactive, orphan) are current and properly filed with the Office of Conservation or Oil Conservation Division
- Load new effective dates and rates into your tax engine before your next filing cycle — retroactive corrections are avoidable
- Revisit exemption eligibility: horizontal well exemptions, enhanced oil recovery (EOR) rate reductions, and low-price stripper exemptions can meaningfully cut your burden, but only with proper documentation
- Cross-check the Oilfield Site Restoration Fee alongside your severance tax rate — it’s easy to update one and forget the other
- Assign someone to monitor LDR Revenue Information Bulletins and NM TRD notices year-round, not just at fiscal year-end
Rate changes are routine. Missing one isn’t, and the cost of catching it late is almost always higher than the cost of watching it closely.
Partner With PetroLedger
Navigating severance rate changes and regulations across multiple producing states can be complex. PetroLedger helps oil and gas companies manage these changes and minimize their monthly severance tax obligations.
Contact PetroLedger today to discuss your severance taxes and build a more effective compliance process. Our team can help review current severance tax workflows, identify potential rate or exemption issues before they become filing problems, and support a more proactive approach to monthly compliance. Whether you are managing production across Louisiana, New Mexico, or other producing states, PetroLedger brings regulatory awareness, tax accounting experience, and practical process support to help reduce risk and improve confidence in every filing cycle.
