Gas severance tax; include carbon dioxide within definition of "gas."

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To: Finance
MISSISSIPPI LEGISLATURE REGULAR SESSION 2026

By: Senator(s) Barnett

SENATE BILL NO. 2858

AN ACT TO AMEND SECTION 27-25-701, MISSISSIPPI CODE OF 1972, 1
TO INCLUDE CARBON DIOXIDE WITHIN THE DEFINITION OF THE TERM "GAS" 2
FOR PURPOSES OF THE GAS SEVERANCE TAX LAWS; TO AMEND SECTION 3
27-25-721, MISSISSIPPI CODE OF 1972, TO CONFORM; TO BRING FORWARD 4
SECTION 27-25-703, MISSISSIPPI CODE OF 1972, FOR THE PURPOSE OF 5
POSSIBLE AMENDMENT; AND FOR RELATED PURPOSES. 6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI: 7
SECTION 1. Section 27-25-701, Mississippi Code of 1972, is 8
amended as follows: 9
27-25-701. Whenever used in this article, the following 10
words and terms shall have the definition and meaning ascribed to 11
them in this section, unless the intention to give a more limited 12
meaning is disclosed by the context: 13
(a) * * * "Department" means the Department of Revenue 14
of the State of Mississippi. 15
(b) "Commissioner" means the Commissioner of 16
Revenue * * *. 17
(c) "Annual" means the calendar year or the taxpayer's 18
fiscal year when permission is obtained from the commissioner to 19
use a fiscal year as a tax period in lieu of a calendar year. 20
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(d) "Value" means the sale price, or market value, at 21
the mouth of the well. If the gas is exchanged for something 22
other than cash, or if there is no sale at the time of severance, 23
or if the relation between the buyer and the seller is such that 24
the consideration paid, if any, is not indicative of the true 25
value or market price, then the commissioner shall determine the 26
value of the gas subject to tax, considering the sale price for 27
cash of gas of like quality in the same or nearest gas-producing 28
field. 29
(e) "Taxpayer" means any person liable for the tax 30
imposed by this article. 31
(f) "Gas" means natural and casinghead gas and any gas 32
or vapor taken from below the surface of the soil or water in this 33
state, including carbon dioxide, regardless of whether produced 34
from a gas well or from a well also productive of oil or any other 35
product * * *. 36
(g) "Casinghead gas" means any gas or vapor indigenous 37
to an oil stratum and produced from such stratum with oil. 38
(h) "Severed" means the extraction or withdrawing by 39
any means whatsoever, from below the surface of the soil or water, 40
of any gas. 41
(i) "Person" means any natural person, firm, 42
copartnership, joint venture, association, corporation, estate, 43
trust, or any other group, or combination acting as a unit, and 44
the plural as well as the singular number. 45
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(j) "Producer" means any person owning, controlling, 46
managing or leasing any oil or gas property, or oil or gas well, 47
and any person who produces in any manner any gas by taking it 48
from the earth or water in this state, and shall include any 49
person owning any royalty or other interest in any gas or its 50
value, whether produced by him, or by some other person on his 51
behalf, either by lease contract or otherwise. 52
(k) "Engaging in business" means any act or acts 53
engaged in (personal or corporate) by producers, or parties at 54
interest, the result of which gas is severed from the soil or 55
water, for storage, transport or manufacture, or by which there is 56
an exchange of money, or goods, or thing of value, for gas which 57
has been or is in process of being severed from the soil or water. 58
(l) "Production" means the total gross amount of gas 59
produced, including all royalty or other interest; that is, the 60
amount for the purpose of the tax imposed by this article shall be 61
measured or determined by meter readings showing one hundred 62
percent (100%) of the full volume expressed in cubic feet at a 63
standard base and flowing temperature of sixty (60) degrees 64
Fahrenheit and at the absolute pressure at which the gas is sold 65
and purchased; correction to be made for pressure according to 66
Boyle's law, and for specific gravity according to the gravity at 67
which the gas is sold and purchased or if not so specified, 68
according to test made by the balance method. 69
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(m) "Gathering system" means the pipelines, 70
compressors, pumps, regulators, separators, dehydrators, meters, 71
metering installations and all other property used in gathering 72
gas from the well from which it is produced if such properties are 73
owned by other than the operator, and all such properties, if 74
owned by the operator, beyond the first metering installation that 75
is nearest the well. 76
(n) "Discovery well" means any well producing gas from 77
a single pool in which a well has not been previously produced in 78
paying quantities after testing. 79
(o) "Development wells" means all gas-producing wells 80
other than discovery wells and replacement wells. 81
(p) "Replacement well" means a well drilled on a 82
drilling and/or production unit to replace another well which is 83
drilled in the same unit and completed in the same pool. 84
(q) "Three-dimensional seismic" means data which is 85
regularly organized in three (3) orthogonal directions and thus 86
suitable for interpretation with a three-dimensional software 87
package on an interactive work station. 88
(r) "Two-year inactive well" means any oil or gas well 89
certified by the State Oil and Gas Board as having not produced 90
oil or gas in more than a total of thirty (30) days during a 91
twelve-consecutive-month period in the two (2) years before the 92
date of certification. 93
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(s) "Horizontally drilled well" means a well in which 94
the deviation of the borehole is at least eighty degrees (80°) 95
from vertical so that the borehole penetrates a productive 96
formation in a manner parallel to the formation and in which there 97
is at least one thousand (1,000) feet of lateral penetration 98
through productive reservoirs. 99
(t) "Horizontally drilled recompletion well" means an 100
existing well in which the deviation of the borehole is at least 101
eighty degrees (80°) from vertical so that the borehole penetrates 102
a productive formation in a manner parallel to the formation and 103
in which there is at least one thousand (1,000) feet of lateral 104
penetration through productive reservoirs. 105
SECTION 2. Section 27-25-721, Mississippi Code of 1972, is 106
amended as follows: 107
27-25-721. All gas * * * produced or under the ground on 108
producing properties within the State of Mississippi and all 109
producing gas * * * equipment, including wells, connections, 110
pumps, derricks and other appurtenances actually owned by and 111
belonging to the producer, and all leases in production, including 112
mineral rights in producing properties, shall be exempt from all 113
ad valorem taxes now levied or hereafter levied by the State of 114
Mississippi, or any other taxing district within this state. This 115
exemption shall not apply to drilling equipment, including 116
derricks, machinery, and other materials necessary to drilling, 117
nor to gas * * * gathering systems, nor to the surface of lands 118
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leased for gas * * * production or upon which gas * * * producing 119
properties are situated, but all such drilling equipment, 120
gathering systems, and lands shall be assessed as are other 121
properties and shall be subject to ad valorem tax. However, no 122
additional assessment shall be added to the surface value of such 123
lands by reason of the presence of gas * * * thereunder or its 124
production therefrom. The exemption herein granted shall apply to 125
all ad valorem taxes levied in the year 1948 and each year 126
thereafter. 127
SECTION 3. Section 27-25-703, Mississippi Code of 1972, is 128
brought forward as follows: 129
27-25-703. (1) (a) Except as otherwise provided in this 130
section, there is hereby levied, to be collected as provided in 131
this article, annual privilege taxes upon every person engaging or 132
continuing within this state in the business of producing, or 133
severing gas from below the soil or water for sale, transport, 134
storage, profit or for commercial use. The amount of the tax 135
shall be measured by the value of the gas produced and shall be 136
levied and assessed at a rate of six percent (6%) of the value of 137
the gas at the point of production, except as otherwise provided 138
in subsection (4) of this section. 139
(b) (i) The tax shall be levied and assessed at the 140
rate of one and three-tenths percent (1.3%) of the value of the 141
gas at the point of production on gas produced from a horizontally 142
drilled well or from any horizontally drilled recompletion well 143
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from which production commences from and after July 1, 2013, for a 144
period of thirty (30) months beginning on the date of first sale 145
of production or until payout of the well cost is achieved, 146
whichever first occurs. Thereafter, the tax shall be levied and 147
assessed as provided for in paragraph (a) of this subsection. 148
(ii) Payout of a horizontally drilled well or 149
horizontally drilled recompletion well shall be deemed to have 150
occurred the first day of the next month after gross revenues, 151
less royalties and severance taxes, equal to the cost to drill and 152
complete the well. 153
(iii) Each operator must apply by letter to the 154
State Oil and Gas Board for the reduced rate provided in this 155
paragraph (b), and shall provide the board with the status of 156
payout on a semiannual basis of any horizontally drilled well or 157
horizontally drilled recompletion well by signed affidavit 158
executed by a company representative. 159
(iv) This paragraph (b) shall be repealed from and 160
after July 1, 2028; however, any horizontally drilled well or 161
horizontally drilled recompletion well from which production 162
commences before July 1, 2028, shall be taxed as provided for in 163
this paragraph (b) notwithstanding that the repeal of this 164
paragraph (b) has become effective. 165
(2) The tax is levied upon the entire production in this 166
state, regardless of the place of sale or to whom sold or by whom 167
used, or the fact that the delivery may be made to points outside 168
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the state, but not levied upon that gas, lawfully injected into 169
the earth for cycling, repressuring, lifting or enhancing the 170
recovery of oil, nor upon gas lawfully vented or flared in 171
connection with the production of oil, nor upon gas condensed into 172
liquids on which the oil severance tax of six percent (6%) is 173
paid; however, if any gas so injected into the earth is sold for 174
such purposes, then the gas so sold shall not be excluded in 175
computing the tax. The tax shall accrue at the time the gas is 176
produced or severed from the soil or water, and in its natural, 177
unrefined or unmanufactured state. 178
(3) Natural gas and condensate produced from any wells for 179
which drilling is commenced after March 15, 1987, and before July 180
1, 1990, shall be exempt from the tax levied under this section 181
for a period of two (2) years beginning on the date of first sale 182
of production from such wells. 183
(4) (a) Any well which begins commercial production of 184
occluded natural gas from coal seams on or after March 20, 1990, 185
and before July 1, 1993, shall be taxed at the rate of three and 186
one-half percent (3-1/2%) of the gross value of the occluded 187
natural gas from coal seams at the point of production for a 188
period of five (5) years after such well begins production. 189
(b) Any well which begins commercial production of 190
occluded natural gas from coal seams on or after July 1, 2004, and 191
before July 1, 2007, shall be taxed at the rate of three percent 192
(3%) of the gross value of the occluded natural gas from coal 193
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seams at the point of production for a period of five (5) years 194
beginning on the date of the first sale of production from such 195
well. 196
(5) (a) Natural gas produced from discovery wells for which 197
drilling or re-entry commenced on or after April 1, 1994, but 198
before July 1, 1999, shall be exempt from the tax levied under 199
this section for a period of five (5) years beginning on the 200
earlier of one (1) year from completion of the well or the date of 201
first sale from such well, provided that the average monthly sales 202
price of such gas does not exceed Three Dollars and Fifty Cents 203
($3.50) per one thousand (1,000) cubic feet. The exemption for 204
natural gas produced from discovery wells as described in this 205
paragraph (a) shall be repealed from and after July 1, 2003, 206
provided that any such production for which a permit was granted 207
by the board before July 1, 2003, shall be exempt for an entire 208
period of five (5) years, notwithstanding that the repeal of this 209
provision has become effective. Natural gas produced from 210
development wells or replacement wells drilled in connection with 211
discovery wells for which drilling commenced on or after January 212
1, 1994, shall be assessed at a rate of three percent (3%) of the 213
value thereof at the point of production for a period of three (3) 214
years. The reduced rate of assessment of natural gas produced 215
from development wells or replacement wells as described in this 216
paragraph (a) shall be repealed from and after January 1, 2003, 217
provided that any such production for which drilling commenced 218
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before January 1, 2003, shall be assessed at the reduced rate for 219
an entire period of three (3) years, notwithstanding that the 220
repeal of this provision has become effective. 221
(b) Natural gas produced from discovery wells for which 222
drilling or re-entry commenced on or after July 1, 1999, shall be 223
assessed at a rate of three percent (3%) of the value thereof at 224
the point of production for a period of five (5) years beginning 225
on the earlier of one (1) year from completion of the well or the 226
date of first sale from such well, provided that the average 227
monthly sales price of such gas does not exceed Two Dollars and 228
Fifty Cents ($2.50) per one thousand (1,000) cubic feet. The 229
reduced rate of assessment of natural gas produced from discovery 230
wells as described in this paragraph (b) shall be repealed from 231
and after July 1, 2003, provided that any such production for 232
which a permit was granted by the board before July 1, 2003, shall 233
be assessed at the reduced rate for an entire period of five (5) 234
years, notwithstanding that the repeal of this provision has 235
become effective. Natural gas produced from development wells or 236
replacement wells drilled in connection with discovery wells for 237
which drilling commenced on or after July 1, 1999, shall be 238
assessed at a rate of three percent (3%) of the value thereof at 239
the point of production for a period of three (3) years. The 240
reduced rate of assessment of natural gas produced from 241
development wells or replacement wells as described in this 242
paragraph (b) shall be repealed from and after January 1, 2003, 243
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provided that any such production for which drilling commenced 244
before January 1, 2003, shall be assessed at the reduced rate for 245
an entire period of three (3) years, notwithstanding that the 246
repeal of this provision has become effective. 247
(6) (a) Gas produced from a development well for which 248
drilling commenced on or after April 1, 1994, but before July 1, 249
1999, and for which three-dimensional seismic was utilized in 250
connection with the drilling of such well, shall be assessed at a 251
rate of three percent (3%) of the value of the gas at the point of 252
production for a period of five (5) years, provided that the 253
average monthly sales price of such gas does not exceed Three 254
Dollars and Fifty Cents ($3.50) per one thousand (1,000) cubic 255
feet. The reduced rate of assessment of gas produced from a 256
development well as described in this subsection and for which 257
three-dimensional seismic was utilized shall be repealed from and 258
after July 1, 2003, provided that any such production for which a 259
permit was granted by the board before July 1, 2003, shall be 260
assessed at the reduced rate for an entire period of five (5) 261
years, notwithstanding that the repeal of this provision has 262
become effective. 263
(b) Gas produced from a development well for which 264
drilling commenced on or after July 1, 1999, and for which 265
three-dimensional seismic was utilized in connection with the 266
drilling of such well, shall be assessed at a rate of three 267
percent (3%) of the value of the gas at the point of production 268
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for a period of five (5) years, provided that the average monthly 269
sales price of such gas does not exceed Two Dollars and Fifty 270
Cents ($2.50) per one thousand (1,000) cubic feet. The reduced 271
rate of assessment of gas produced from a development well as 272
described in this paragraph (b) and for which three-dimensional 273
seismic was utilized shall be repealed from and after July 1, 274
2003, provided that any such production for which a permit was 275
granted by the board before July 1, 2003, shall be assessed at the 276
reduced rate for an entire period of five (5) years, 277
notwithstanding that the repeal of this provision has become 278
effective. 279
(7) (a) Natural gas produced before July 1, 1999, from a 280
two-year inactive well as defined in Section 27-25-701 shall be 281
exempt from the taxes levied under this section for a period of 282
three (3) years beginning on the date of first sale of production 283
from such well, provided that the average monthly sales price of 284
such gas does not exceed Three Dollars and Fifty Cents ($3.50) per 285
one thousand (1,000) cubic feet. The exemption for natural gas 286
produced from an inactive well as described in this subsection 287
shall be repealed from and after July 1, 2003, provided that any 288
such production which began before July 1, 2003, shall be exempt 289
for an entire period of three (3) years, notwithstanding that the 290
repeal of this provision has become effective. 291
(b) Natural gas produced on or after July 1, 1999, from 292
a two-year inactive well as defined in Section 27-25-701 shall be 293
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ST: Gas severance tax; include carbon dioxide
within definition of "gas."
exempt from the taxes levied under this section for a period of 294
three (3) years beginning on the date of first sale of production 295
from such well, provided that the average monthly sales price of 296
such gas does not exceed Two Dollars and Fifty Cents ($2.50) per 297
one thousand (1,000) cubic feet. The exemption for natural gas 298
produced from an inactive well as described in this paragraph (b) 299
shall be repealed from and after July 1, 2003, provided that any 300
such production which began before July 1, 2003, shall be exempt 301
for an entire period of three (3) years, notwithstanding that the 302
repeal of this provision has become effective. 303
(8) The State Oil and Gas Board shall have the exclusive 304
authority to determine the qualification of wells defined in 305
paragraphs (n) through (t) of Section 27-25-701. 306
SECTION 4. This act shall take effect and be in force from 307
and after July 1, 2026. 308