MISSISSIPPI LEGISLATURE

1999 Regular Session

To: Ways and Means

By: Representatives Bowles, Moak

AN ACT TO AMEND SECTION 27-25-503, MISSISSIPPI CODE OF 1972, TO EXEMPT FROM SEVERANCE TAX THE OIL PRODUCED FROM CERTAIN MARGINAL WELLS; TO CORRECT A TYPOGRAPHICAL ERROR IN THE CODE; 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 The exemption for oil produced from a discovery well as described in this subsection shall be repealed from and after July 1, 1999, provided that any such production for which a permit was granted by the board before July 1, 1999, shall be exempt for an entire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, 1999, provided that any such production for which drilling commenced before January 1, 1999, 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, 1999, provided that any such production for which a permit was granted by the board before July 1, 1999, 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, 1999, provided that any such production which began before July 1, 1999, shall be exempt for an entire period of three (3) years, notwithstanding that the repeal of this provision has become effective.

(6) From and after May 1, 1999, based on the production records of the well as of February 15, 1999, the following oil shall be exempt from the taxes levied under this section provided that the average monthly sale price of such oil does not exceed Twelve Dollars ($12.00) per barrel to be determined by figures provided on a daily basis by the New York Mercantile Exchange:

(a) Oil produced from a well producing a monthly average of twenty (20) barrels a day or less from a depth of seven thousand five hundred (7,500) feet or less;

(b) Oil produced from a well producing a monthly average of thirty (30) barrels a day or less from a depth that is more than seven thousand five hundred (7,500) feet but less than thirteen thousand (13,000) feet; and

(c) Oil produced from a well producing a monthly average of forty (40) barrels a day or less from a depth of thirteen thousand (13,000) feet or more.

(7) 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 27-25-501.

SECTION 2. This act shall take effect and be in force from and after its passage.