2023 New Mexico Statutes › Chapter 7 - Taxation › Article 33 - Natural Gas Processors Tax › Section 7-33-4 - Privilege tax levied; collected by department; rate.

A. There is levied and shall be collected by the department a privilege tax on processors for the privilege of operating a natural gas processing plant in New Mexico. This tax may be referred to as the "natural gas processors tax".
B. The tax shall be imposed on the amount of mmbtus of natural gas delivered to the processor at the inlet of the natural gas processing plant after subtracting the mmbtu deductions authorized in Subsection E of this section. The tax shall be imposed at the rate per mmbtu determined in Subsection C or D of this section, as applicable.
C. The tax rate for the six-month period beginning on January 1, 1999 shall be determined by multiplying the rate of sixty-five hundredths of one cent ($.0065) per mmbtu by a fraction, the numerator of which is the annual average taxable value per mcf of natural gas produced in New Mexico during the 1997 calendar year and the denominator of which is one dollar thirty-three cents ($1.33) per mcf. The resulting tax rate shall be rounded to the nearest one-hundredth of one cent per mmbtu.
D. The tax rate for each fiscal year beginning on or after July 1, 1999 shall be determined by multiplying the rate of sixty-five hundredths of one cent ($.0065) per mmbtu by a fraction, the numerator of which is the annual average taxable value per mcf of natural gas produced in New Mexico during the preceding calendar year and the denominator of which is one dollar thirty-three cents ($1.33) per mcf. The resulting tax rate shall be rounded to the nearest one-hundredth of one cent per mmbtu.
E. A processor may deduct from the amount of mmbtus of natural gas subject to the tax the mmbtus of natural gas that are:
(1) used for natural gas processing by the processor;
(2) returned to the lease from which it is produced;
(3) legally flared by the processor; or
(4) lost as a result of natural gas processing plant malfunctions or other incidences of force majeur.
F. On or before June 15, 1999 and June 15 of each succeeding year, the department shall inform each processor in writing of the tax rate applicable for the succeeding fiscal year.
G. Any Indian nation, tribe or pueblo or Indian is liable for the tax to the extent authorized or permitted by law.
History:
1953 Comp., § 72-23-4, enacted by Laws 1963, ch. 179, § 4; 1970, ch. 13, § 5; 1984, ch. 2, § 9; 1998, ch. 102, § 2.
ANNOTATIONS
The 1998 amendment,
effective January 1, 1999, deleted "oil and gas accounting division of the taxation and revenue" from the section heading and rewrote the section to the extent that a detailed comparison is impracticable.
"Interest owners" liable under former section.
— Under the version of this section in effect prior to its 1998 amendment, the "interest owner" of the natural gas was liable for the privilege tax on processing natural gas.
Blackwood & Nichols Co. v. N.M. Taxation & Revenue Dep't
, 1998-NMCA-113, 125 N.M. 576, 964 P.2d 137, cert. denied, 126 N.M. 107, 967 P.2d 447 (decided under prior law).
Marketable condition rule does not apply in New Mexico.
— Where Appellants, several living trusts that held royalty interests on oil and gas leases (Trusts), brought a putative class action against Defendant, the owner and operator of natural gas wells on the leases, claiming that Defendant was systematically underpaying royalties by improperly deducting from their royalties their proportionate share of the costs incurred to place the gas produced from the wells in a marketable condition (post-production costs), the district court did not err in dismissing the Trusts' claims, because under New Mexico law, Defendant had a duty to diligently market the gas for the benefit of the Trusts but that duty did not prohibit it from deducting from royalty payments the Trusts' proportionate share of post-production costs, those costs necessary to make the gas marketable. The marketable condition rule, which requires the lessor to market gas, but to do so solely at its expense, does not apply in New Mexico.
Anderson Living Trust v. Energen Resources Corp.
, 886 F.3d 826 (10th Cir. 2018).
Third-party gas processors may pass tax onto owner and operator of natural gas well who may in turn pass tax onto interest owners.
— Where Appellants, several living trusts that held royalty interests on oil and gas leases (Trusts), brought a putative class action against Defendant, the owner and operator of natural gas wells on the leases, claiming that Defendant was systematically underpaying royalties by improperly deducting from their royalties a privilege tax the State of New Mexico imposes on natural gas processors (the natural gas processors tax), the district court did not err in granting Defendant's motion for summary judgment, because Subsection A of this section places the responsibility for paying the tax on natural gas processors, but there is nothing in this section that prohibits the processors from passing the tax onto Defendant, the owner and operator of the gas wells, or from Defendant passing the tax onto the interest owners.
Anderson Living Trust v. Energen Resources Corp.
, 886 F.3d 826 (10th Cir. 2018).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
85 C.J.S. Taxation § 973 et seq.