Fact Check: Severance Tax Proposal Would be Highest in US

SEPTEMBER 28, 2010 | by NATHAN BENEFIELD

SB 1155 would impose a severance tax rate of 39 cents per MCF. At the August estimated average wellhead price of $4.22 per MCF, this is an effective tax rate of 9.22%. This would be the highest severance tax in the nation.

 

Severance Tax for Top Natural Gas Producing States
Top Natural Gas Producing States State Severance Tax on Natural Gas Severance Tax Exemptions and Incentives for Unconventional Wells Top Corporate Net Income Tax State & Local Tax Burden As a Percentage of State Income (Rank)
1 Texas 7.5% of market value Rate reduction appr. 2% for up to 10 years 0.00% 8.4% (43)
2 Wyoming 6% of taxable value (gross sales minus certain processing and transportation costs) Gas transportation costs are significant and are subtracted from the taxable value 0.00% 7.0% (48)
3 Oklahoma 7% plus 0.095% excise tax Exempt from severance tax for four years or until gas production pays for the cost of the well 6.00% 9.8% (19)
4 New Mexico 3.75%
7.60% 8.6% (39)
5 Louisiana $0.03 - 0.13 per MCF Severance tax suspension on horizontally drilled well for 2 years or until payback 8.00% 8.4% (42)
6 Colorado 2% to 5% based on gross income Allows producers to deduct 87.5% of their property taxes paid to gov. from severance tax to state. 4.63% 9.0% (34)
7 Alaska 25% to 50% net value Reduction for all drilling in Cook Inlet basin and when gas is used instate; result minimal tax (appr. 1%). State also gives certain tax credits for exploration 6.50% 6.4% (50)
8 Utah 3% - 5% 6 months exemption for development wells 5.00% 9.6% (22)
9 Kansas 8% on gross value severed from earth There is 3.67% tax credit for ad valorem taxes paid, effectively reducing the severance tax to 4.33% 7.05% 9.6% (21)
10 California Less than 0.01 per mcf
8.84% 10.5% (6)
11 Alabama 4-8% of gross value
6.50% 8.6% (38)
12 Arkansas 5% 1.5% on new discovery wells for 24 months and on high cost wells for 36 months (can get extension) 6.50% 10.0% (14)
13 Michigan 5%
4.95% 9.4% (27)
14 West Virginia 5% plus $0.047 per MCF
8.50% 9.3% (29)
15 Pennsylvania No Tax
9.99% 10.2% (11)

Read all of the Natural Gas: Myths & Facts at EnergyFactsPA.com.



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