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Fact Check: Severance Tax Proposal Would be Highest in US
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.