SB 034: TAX RATE DIFFERENTIAL FOR CERTAIN OIL

An Act Relating To Taxation; Creating A Tax Rate Differential For Oil Produced From A Qualified Enhanced Recovery Project That Uses Carbon Dioxide To Displace The Oil From Natural Gas; Amending A Section Of The Oil And Gas Severance Tax Act; Defining "posted Price" In The Oil And Gas Severance Tax Act.

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MOD SB 034
TAX RATE DIFFERENTIAL FOR CERTAIN OIL

Legislative URL:

SB 034 on nmlegis.gov

Emergency Clause:

No

Germane:

Yes

Location:

SFC

Action:

SPREF [1] SCC/SCORC/SFC-SCC [6]germane-SCORC [15] DP/a-SFC API.

Issue(s):

Energy

Companion Bills

Bills:

TAX RATE DIFFERENTIAL FOR CERTAIN OIL

Related Legislators

Bill Sponsor:

Gay Kernan

Related Documents

Downloads:

Introduced
SCC Committee Report
SCORC Committee Report
Fiscal Impact Report

Summary

This bill extends a 50 percent reduction in the severance tax (from 3.75% to 1.875%) to oil and other liquid hydrocarbons removed from natural gas at or near the wellhead produced from a qualified enhanced recovery project that involves the application of carbon dioxide, if the relevant price of West Texas intermediate crude oil is between $28 and $60 per barrel.

The same severance tax break is currently available (regardless of application of carbon dioxide) if the relevant price of west Texas intermediate crude oil is less than $28 per barrel.

A potential effect of this bill is that it may encourage additional production of oil from existing wells using carbon dioxide.

On February 11 the Senate Corporations and Transportation Committee amended SB 34. The amendment specifies that the tax break is contingent upon the “injection” (instead of “application”) of “anthropogenic carbon dioxide,” which it defines as “carbon dioxide captured from an industrial source, which would otherwise be released into the atmosphere as industrial emission of greenhouse gas.”

The SCORC amendment also changes the reduced severance tax to: (a) two and three-fourths percent if 25-50 percent of the total amount of carbon dioxide injected during the taxable period consists of anthropogenic carbon dioxide; and (b) one and three-fourths percent if more than 50 percent of the total amount of carbon dioxide injected during the taxable period consists of anthropogenic carbon dioxide. And it makes the tax break temporary, beginning July 1, 2016 and ending July 1, 2026.

A potential effect of this bill, as amended, is that it may over a 10-year period encourage additional production of oil from existing wells using higher amounts of anthropogenic carbon dioxide. A potential benefit is the resulting geologic sequestration of anthropogenic carbon dioxide.