2023 New Mexico Statutes › Chapter 7 - Taxation › Article 29 - Oil and Gas Severance Tax › Section 7-29-4 - Oil and gas severance tax imposed; collection; interest owner's liability to state; Indian liability.

A. There is imposed and shall be collected by the department a tax on all products that are severed and sold, except as provided in Subsection B of this section. The measure of the tax and the rates are:
(1) on natural gas severed and sold, except as provided in Paragraphs (4), (6) and (7) of this subsection, three and three-fourths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978;
(2) on oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead, except as provided in Paragraphs (3), (5), (8) and (9) of this subsection, three and three-fourths percent of taxable value determined pursuant to Section 7-29-4.1 NMSA 1978;
(3) on oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead produced from a qualified enhanced recovery project, one and seven-eighths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the annual average price of west Texas intermediate crude oil, determined by the department by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May 31 prior to the fiscal year in which the tax rate is to be imposed, was less than twenty-eight dollars ($28.00) per barrel;
(4) on the natural gas from a well workover project that is certified by the oil conservation division of the energy, minerals and natural resources department in its approval of the well workover project, two and forty-five hundredths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the annual average price of west Texas intermediate crude oil, determined by the department by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May 31 prior to the fiscal year in which the tax rate is to be imposed, was less than twenty-four dollars ($24.00) per barrel;
(5) on the oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead from a well workover project that is certified by the oil conservation division of the energy, minerals and natural resources department in its approval of the well workover project, two and forty-five hundredths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the annual average price of west Texas intermediate crude oil, determined by the department by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May 31 prior to the fiscal year in which the tax rate is to be imposed, was less than twenty-four dollars ($24.00) per barrel;
(6) on the natural gas from a stripper well property, one and seven-eighths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided the average annual taxable value of natural gas was equal to or less than one dollar fifteen cents ($1.15) per thousand cubic feet in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed;
(7) on the natural gas from a stripper well property, two and thirteen-sixteenths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the average annual taxable value of natural gas was greater than one dollar fifteen cents ($1.15) per thousand cubic feet but not more than one dollar thirty-five cents ($1.35) per thousand cubic feet in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed;
(8) on the oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead from a stripper well property, one and seven-eighths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the average annual taxable value of oil was equal to or less than fifteen dollars ($15.00) per barrel in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed;
(9) on the oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead from a stripper well property, two and thirteen-sixteenths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978, provided that the average annual taxable value of oil was greater than fifteen dollars ($15.00) per barrel but not more than eighteen dollars ($18.00) per barrel in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed; and
(10) on carbon dioxide, helium and non-hydrocarbon gases, three and three-fourths percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978.
B. The tax imposed in Subsection A of this section shall not be imposed on:
(1) natural gas severed and sold from a production restoration project during the first ten years of production following the restoration of production, provided that the annual average price of west Texas intermediate crude oil, determined by the department by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May 31 prior to each fiscal year in which the tax exemption is to be effective, was less than twenty-four dollars ($24.00) per barrel; and
(2) oil and other liquid hydrocarbons removed from natural gas at or near the wellhead from a production restoration project during the first ten years of production following the restoration of production, provided that the annual average price of west Texas intermediate crude oil, determined by the department by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May 31 prior to each fiscal year in which the tax exemption is to be effective, was less than twenty-four dollars ($24.00) per barrel.
C. Every interest owner shall be liable for the tax to the extent of his interest in such products. Any Indian tribe, Indian pueblo or Indian shall be liable for the tax to the extent authorized or permitted by law.
D. The tax imposed by this section may be referred to as the "oil and gas severance tax".
History:
1978 Comp., § 7-29-4, enacted by Laws 1980, ch. 62, §§ 3, 5; 1987, ch. 315, § 3; 1989, ch. 130, § 2; 1992, ch. 38, § 7; 1995, ch. 15, § 8; 1999, ch. 256, § 2; 2005, ch. 130, § 2.
ANNOTATIONS
Cross references.
— For the Natural Gas and Crude Oil Production Incentive Act,
see
7-29B-1 NMSA 1978.
The 2005 amendment,
effective July 1, 2005, imposed the severance tax on helium and non-hydrocarbon gases in Subsection A(10).
The 1999 amendment,
effective June 18, 1999, substituted "pursuant to" for "under" throughout the section; substituted "Paragraphs (4), (6) and (7)" for "Paragraph (4)" in Subsection A(1); inserted "(8) and (9)" in Subsection A(2); deleted "in excess of the production projection" preceding "certified" and substituted "two and forty-five hundredths percent" for "one and seven-eighths percent" in Subsections A(4) and A(5); and added Subsections A(6) through A(9), redesignating former Subsection A(6) as A(10).
The 1995 amendment,
effective June 16, 1995, in Subsection A, added the exception at the end of the first sentence, rewrote Paragraph (1), substituted "Paragraphs (3) and (5)" for "Paragraph (3)" in Paragraph (2), added Paragraphs (4) and (5), and redesignated former Paragraph (4) as Paragraph (6); added subsection B; and redesignated former Subsections B and C as Subsections C and D.
The 1992 amendment,
effective March 6, 1992, in Subsection A, inserted "except as provided in Paragraph (3) of this subsection" in Paragraph (2), added Paragraph (3), made a related stylistic change, and redesignated former Paragraph (3) as Paragraph (4); and added Subsection C.
The 1989 amendment,
effective June 16, 1989, in Subsection A(1) substituted "taxable value determined under Section 7-29-4.1 NMSA 1978" for "value" in Subparagraph (a) and substituted all of the language of Subparagraph (b) beginning with "taxable" for "value of products"; and added Subsection A(3).
Tribe's power to impose severance tax not limited by federal government.
— The federal interest in interstate commerce, manifested in traditional commerce clause analyses, does not limit the Jicarilla Apache tribe's power to impose an oil and gas severance tax to be measured by production of these products within the reservation.
Merrion v. Jicarilla Apache Tribe
, 617 F.2d 537 (10th Cir. 1980),
aff'd
, 455 U.S. 130, 102 S. Ct. 894, 71 L. Ed. 2d 21 (1982).
Non-Indian producers operating on reservations.
— Oil and gas taxes imposed by the state against a non-Indian producer whose operations are located on an Indian reservation do not constitute an impermissible burden on interstate commerce, were not preempted by federal laws promoting tribal self-sufficiency, and may be imposed on the same on-reservation production of oil and gas by non-Indian lessees as is subject to the tribe's own severance tax.
Cotton Petroleum v. State
, 1987-NMCA-121, 106 N.M. 517, 745 P.2d 1170, cert. quashed, 106 N.M. 511, 745 P.2d 1159,
aff'd
, 490 U.S. 163, 109 S. Ct. 1698, 104 L. Ed. 2d 209 (1989).
Tax liability of interest owners.
— Although, pursuant to Subsection C, each interest owner is liable for its proportionate share of the calculated tax, the law does not mandate or even contemplate the determination of different taxable values for each of the various interest owners based on proceeds received downstream from the wellhead. The law is satisfied so long as (1) carbon dioxide production is accurately measured and valued as a whole at the wellhead, (2) the appropriate tax rate is applied to that production to calculate the total tax owed, and (3) the total tax is allocated to the various interest owners in proportion to their fractional interest in that production. Any readjustment in the allocation of the tax burden among working interest owners and royalty interest owners is left to private contract.
Feerer v. Amoco Prod. Co
., 242 F.3d 1259 (10th Cir. 2001).
Taxable value of carbon dioxide.
— The calculation of severance taxes under New Mexico law, Subsection A(6) (now Subsection A(10)), is based on a single valuation of a total quantity of carbon dioxide extracted at the wellhead during a given time period.
Feerer v. Amoco Prod. Co
., 242 F.3d 1259 (10th Cir. 2001).
Law reviews.
— For article, "Nonneutral Features of Energy Taxation," see 20 Nat. Resources J. 853 (1980).
For note, "Court Picks New Test in Cotton Petroleum," see 30 Nat. Resources J. 919 (1990).
Am. Jur. 2d, A.L.R. and C.J.S. references. —
72 Am. Jur. 2d State and Local Taxation §§ 739 to 752.
53 C.J.S. Licenses §§ 65, 70; 85 C.J.S. Taxation §§ 973 to 978.