OUR THOUGHTS ON:

State Severance and Production Taxes

Energy & Resources|State and Local Tax|Tax

By Allen Wassel

In addition to state taxes imposed on net income, coal companies and oil/gas producers are also subject to severance and production taxes based on the gross volume of these natural resources extracted from the earth.

The ultimate use of the taxes varies from state to state, but most commonly, the funds are used for general operating expenses, conservation projects, education and reserve funds when the energy resources are exhausted.

Just as use of the funds varies from state to state, so do the tax rates and bases for imposing the taxes.

The attached matrix summarizes the coal severance and oil/gas production taxes imposed by states with the greatest volume of producers. 

 

State

Coal Severance Tax Rates

Oil and Gas Severance/Production Tax Rate

Misc Oil and Gas Fees/Assessments

Colorado

36¢ per ton
For every full 1.5% of change in the producers' price index for all commodities, the tax rate will be increased or decreased 1%. No tax is imposed on the first 300,000 tons of coal produced in each quarter of a taxable year. A credit of 50% of the tax for coal produced from underground mines and an additional credit of 50% of the tax for the production of lignitic coal are allowed.
(Colo. Rev. Stat. §39-29-106 )

Under $25,000 gross income: 2%
$25,000 - $99,999: $500 + 3% of excess over $24,999
$100,000 - $299,999: $2,750 + 4% of excess over $99,999
$300,000 and over: $10,750 + 5% of excess over $299,999
(Colo. Rev. Stat. §39-29-105)

 

New York

None

None

 

North Dakota

37.5¢ per ton, plus an additional 2¢ per ton.
(N.D. Cent. Code §57-61-01)

Oil and Gas Production Taxes:
Oil: 5% of gross value at oil well
Gas: 09.82¢ per mcf (for fiscal year July 1, 2014 - June 30, 2015) and 08.33¢ per mcf (for fiscal year July 1, 2013 - June 30, 2014)
Oil Extraction Tax:
6.5% of gross value extracted at the well, multiplied by a base rate adjustment that is calculated annually to adjust for inflation. Rate decreases to 4% if the average price of a barrel of crude oil for any consecutive 5-month period of any year drops below the "trigger price."

Note:
Reduced 2% oil extraction tax is applicable conditionally to the gross value of the lesser of the first 75,000 barrels or the first $4.5 million of gross value at the well of oil produced during the first 18 months after completion of a qualifying horizontal well drilled and completed after April 2009.

Ohio

7¢ per ton plus an additional 1¢ per ton contingent tax and an additional 1¢ per ton temporary tax
(Ohio Rev. Code Ann. §5749.02)

Oil: 10¢ per barrel
Natural gas: 2.5¢ per 1,000 cubic feet
(Ohio Rev. Code Ann. §5749.02)

 

Oklahoma

None

7% of gross value per barrel
7% of the gross value of production of gas
Additional tax of 12.5% of gross value (1) of all oil reported as recovered from streams, lakes, ponds, ravines and other natural depressions; and (2) of all oil reported, if report does not disclose actual source of oil.
(Okla. Stat. tit. 68, §1001, Okla. Stat. tit. 68, §1003)

 

Pennsylvania

None

None

Unconventional gas well fee of $40k-$60k for year 1, reduced fee for years 2-15.  Fees based on average annual market price of natural gas within a tiered-fee structure.
(Act 13 of 2012)

Texas

None

4.6% of market value of oil produced in Texas, or 4.6¢ for each barrel of 42 standard gallons of oil produced, whichever formula results in the greater amount of tax. 7.5% of market value of gas produced and saved in Texas (Tex. Tax Code Ann. §202.052, Tex. Tax Code Ann. §201.052)

 

West Virginia

5% of the gross value
(W. Va. Code §11-13A-3a)

5% of gross value, which includes additional 0.35%
(W. Va. Code §11-13A-3)

 

 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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