Oil tax plan key issue

• By WILL SENTELL
• Advocate Capitol News Bureau
• Published: Oct 8, 2007

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A law professor at Tulane University predicts that Democratic gubernatorial contender Foster Campbell’s $5.5 billion processing tax plan on oil and natural gas would survive a court challenge.

“I have reached the conclusion that the measure you have outlined to me would be constitutional,” Professor Vernon said Palmer in a five-page letter to Campbell dated Sept. 14.

Other legal experts are not so sure.

“First of all I think that if we attempt to enact this, the line at the courthouse will be pretty long,” said Christopher M. Pietruszkiewicz, who is J.Y. Saunders professor of law at the LSU Law Center.

“And I suspect that they (opponents) will have five or six different types of constitutional arguments that they would make,” said Pietruszkiewicz, who teaches tax law.

Whether Campbell’s plan has a chance of becoming reality is one of the issues in the Oct. 20 primary election.

The other best-financed  contenders are Republican U.S. Rep. Bobby Jindal of Kenner; Democratic state Sen. Walter Boasso of Arabi; and John Georges, a New Orleans area businessman who is not affiliated with a political party.

Palmer, whose opinion was cited by Campbell in a Baton Rouge debate on Sept. 27, said he was approached by a third party and agreed to offer his tax opinion in writing. He said he is not part of the Campbell campaign and was not paid for his report.

Other legal experts were asked for off-the-cuff opinions on the processing tax.

Campbell, who lives in Bossier Parish, has all but made the tax proposal his sole campaign issue.

He says his plan would:

• Allow the state to raise $5.5 billion per year based on a cost of $59 per barrel.
• Repeal key taxes, including the state individual and corporate income taxes, as part of a savings of $3.7 billion per year.
• Use the remaining $1.8 billion per year for better roads, coastal improvements, health, education and Louisiana’s rainy day fund.

The proposal faces major political and legislative  hurdles, including Campbell winning the race for governor.

The Louisiana Constitution says the only tax the state can levy on oil and natural gas is one on the natural resources as they are taken from the ground. It is called a severance tax.

Campbell’s proposal would let state lawmakers and voters remove that restriction. The switch would pave the way for the state to enact a new tax on the value of oil and natural gas from federal offshore waters and other nations and states as it is refined and processed in Louisiana. The Democrat says 95 percent of the oil that comes through the state is foreign produced.