MISSISSIPPI LEGISLATURE

1998 Regular Session

To: Finance

By: Senator(s) Dearing

AN ACT TO AMEND SECTION 27-25-503, MISSISSIPPI CODE OF 1972, TO EXTEND THE REPEALER ON THE EXEMPTION FROM SEVERANCE TAX ON CERTAIN "NEW" OIL; TO AMEND SECTION 27-25-703, MISSISSIPPI CODE OF 1972, TO EXTEND THE REPEALER ON THE EXEMPTION FROM SEVERANCE TAX ON CERTAIN "NEW" GAS; AND FOR RELATED PURPOSES. 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 27-25-503, Mississippi Code of 1972, is amended as follows:

27-25-503. (1) Except as otherwise provided herein, there is hereby levied, to be collected hereafter, as provided herein, annual privilege taxes upon every person engaging or continuing within this state in the business of producing, or severing oil, as defined herein, from the soil or water for sale, transport, storage, profit or for commercial use. The amount of such tax shall be measured by the value of the oil produced, and shall be levied and assessed at the rate of six percent (6%) of the value thereof at the point of production. However, such tax shall be levied and assessed at the rate of three percent (3%) of the value of the oil at the point of production on oil produced by an enhanced oil recovery method in which carbon dioxide is used; provided, that such carbon dioxide is transported by pipeline to the oil well site and on oil produced by any other enhanced oil recovery method approved and permitted by the State Oil and Gas Board on or after April 1, 1994, pursuant to Section 53-3-101 et seq.

(2) The tax is hereby levied upon the entire production in this state regardless of the place of sale or to whom sold, or by whom used, or the fact that the delivery may be made to points outside the state, and the tax shall accrue at the time such oil is severed from the soil, or water, and in its natural, unrefined or unmanufactured state.

(3) Oil produced from a discovery well for which drilling or re-entry commenced on or after April 1, 1994, shall be exempt from the taxes levied under this section for a period of five (5) years beginning on the date of first sale of production from such well, provided that the average monthly sales price of such oil does not exceed Twenty-five Dollars ($25.00) per barrel. The exemption for oil produced from a discovery well as described in this subsection shall be repealed from and after July 1, 2004, provided that any such production for which a permit was granted by the board before July 1, 2004, shall be exempt for an entire period of five (5) years, notwithstanding that the repeal of this provision has become effective. Oil produced from development wells or replacement wells drilled in connection with discovery wells for which drilling commenced on or after January 1, 1994, shall be assessed at the rate of three percent (3%) of the value of the oil at the point of production for a period of three (3) years. The reduced rate of assessment of oil produced from development wells or replacement wells as described in this subsection shall be repealed from and after January 1, 2004, provided that any such production for which drilling commenced before January 1, 2004, shall be assessed at the reduced rate for an entire period of three (3) years, notwithstanding that the repeal of this provision has become effective.

(4) Oil produced from a development well for which drilling commenced on or after April 1, 1994, and for which three-dimensional seismic was utilized in connection with the drilling of such well shall be assessed at the rate of three percent (3%) of the value of the oil at the point of production for a period of five (5) years, provided that the average monthly sales price of such oil does not exceed Twenty-five Dollars ($25.00) per barrel. The reduced rate of assessment of oil produced from a development well as described in this subsection and for which three-dimensional seismic was utilized shall be repealed from and after July 1, 2004, provided that any such production for which a permit was granted by the board before July 1, 2004, shall be assessed at the reduced rate for an entire period of five (5) years, notwithstanding that the repeal of this provision has become effective.

(5) Oil produced from a two-year inactive well as defined in Section 27-25-501 shall be exempt from the taxes levied under this section for a period of three (3) years beginning on the date of first sale of production from such well, provided that the average monthly sales price of such oil does not exceed Twenty-five Dollars ($25.00) per barrel. The exemption for oil produced from an inactive well shall be repealed from and after July 1, 2004, provided that any such production which began before July 1, 2004, shall be exempt for an entire period of three (3) years, notwithstanding that the repeal of this provision has become effective.

(6) The State Oil and Gas Board shall have the exclusive authority to determine the qualification of wells defined in paragraphs (n) through (r) of Section 27-15-501.

SECTION 2. Section 27-25-703, Mississippi Code of 1972, is amended as follows:

27-25-703. (1) Except as otherwise provided herein, there is hereby levied, to be collected hereafter, as provided herein, annual privilege taxes upon every person engaging or continuing within this state in the business of producing, or severing gas, as defined herein, from below the soil or water for sale, transport, storage, profit or for commercial use. The amount of such tax shall be measured by the value of the gas produced and shall be levied and assessed at a rate of six percent (6%) of the value thereof at the point of production, except as otherwise provided in subsection (4) of this section.

(2) The tax is hereby levied upon the entire production in this state, regardless of the place of sale or to whom sold or by whom used, or the fact that the delivery may be made to points outside the state, but not levied upon that gas, including carbon dioxide, lawfully injected into the earth for cycling, repressuring, lifting or enhancing the recovery of oil, nor upon gas lawfully vented or flared in connection with the production of oil, nor upon gas condensed into liquids on which the oil severance tax of six percent (6%) is paid; save and except, however, if any gas so injected into the earth is sold for such purposes, then the gas so sold shall not be excluded in computing the tax, unless such gas is carbon dioxide which is sold to be used and is used in Mississippi in an enhanced oil recovery method, in which event there shall be no severance tax levied on carbon dioxide so sold and used. The tax shall accrue at the time the gas is produced or severed from the soil or water, and in its natural, unrefined or unmanufactured state.

(3) Natural gas and condensate produced from any wells for which drilling is commenced after March 15, 1987, and before July 1, 1990, shall be exempt from the tax levied under this section for a period of two (2) years beginning on the date of first sale of production from such wells.

(4) Any well which begins commercial production of occluded natural gas from coal seams on or after March 20, 1990, and before July 1, 1993, shall be taxed at the rate of three and one-half percent (3-1/2%) of the gross value of the occluded natural gas from coal seams at the point of production for a period of five (5) years after such well begins production.

(5) Natural gas produced from discovery wells for which drilling or re-entry commenced on or after April 1, 1994, shall be exempt from the tax levied under this section for a period of five (5) years beginning on the earlier of one (1) year from completion of the well or the date of first sale from such well, provided that the average monthly sales price of such gas does not exceed Three Dollars and Fifty Cents ($3.50) per one thousand (1,000) cubic feet. The exemption for natural gas produced from discovery wells as described in this subsection shall be repealed from and after July 1, 2004, provided that any such production for which a permit was granted by the board before July 1, 2004, shall be exempt for an entire period of five (5) years, notwithstanding that the repeal of this provision has become effective. Natural gas produced from development wells or replacement wells drilled in connection with discovery wells for which drilling commenced on or after January 1, 1994, shall be assessed at a rate of three percent (3%) of the value thereof at the point of production for a period of three (3) years. The reduced rate of assessment of natural gas produced from development wells or replacement wells as described in this subsection shall be repealed from and after January 1, 2004, provided that any such production for which drilling commenced before January 1, 2004, shall be assessed at the reduced rate for an entire period of three (3) years, notwithstanding that the repeal of this provision has become effective.

(6) Gas produced from a development well for which drilling commenced on or after April 1, 1994, and for which three-dimensional seismic was utilized in connection with the drilling of such well, shall be assessed at a rate of three percent (3%) of the value of the gas at the point of production for a period of five (5) years, provided that the average monthly sales price of such gas does not exceed Three Dollars and Fifty Cents ($3.50) per one thousand (1,000) cubic feet. The reduced rate of assessment of gas produced from a development well as described in this subsection and for which three-dimensional seismic was utilized shall be repealed from and after July 1, 2004, provided that any such production for which a permit was granted by the board before July 1, 2004, shall be assessed at the reduced rate for an entire period of five (5) years, notwithstanding that the repeal of this provision has become effective.

(7) Natural gas produced from a two-year inactive well as defined in Section 27-25-701 shall be exempt from the taxes levied under this section for a period of three (3) years beginning on the date of first sale of production from such well, provided that the average monthly sales price of such gas does not exceed Three Dollars and Fifty Cents ($3.50) per one thousand (1,000) cubic feet. The exemption for natural gas produced from an inactive well as described in this subsection shall be repealed from and after July 1, 2004, provided that any such production which began before July 1, 2004, shall be exempt for an entire period of three (3) years, notwithstanding that the repeal of this provision has become effective.

(8) The State Oil and Gas Board shall have the exclusive authority to determine the qualification of wells defined in paragraphs (n) through (r) of Section 27-15-701.

SECTION 3. This act shall take effect and be in force from and after July 1, 1998.