Court Opinion

ID: 3264073
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:33:57.222288+00
Date Added: 2024-06-11T13:09:19.438593
License: Public Domain

Honorable L.L. "Doc" Bryan State Representative 305 South Vancouver Russellville, AR  72801
Dear Representative Bryan:
This is in response to your opinion request regarding Arkansas' "Severance Tax Act", Ark. Stat. Ann. 84-2101 et seq. (Repl. 1980). Each of the questions you posed is immediately followed with a brief reply:
   IS A LANDOWNER WHO LEASES HIS PROPERTY FOR OIL PRODUCTION OBLIGATED TO PAY SEVERANCE TAXES ON THE ROYALTY INTEREST HE RECEIVES?
Generally, the owner (lessor) is not required to directly pay any severance taxes because primary responsibility lies with the producer (lessee).  However, the owner's (lessor's) royalty interest may be subject to a lien should the producer (lessee) fail to pay all severance taxes due.  The lessee (producer) is primarily obligated to pay all severance taxes including that amount which is the basis of the lessor's royalty interest.  The producer (lessee) is required to deduct that "amount of the severance tax in respect thereto from any such royalty . . . ." Ark. Stat. Ann. 84-2105 (Repl. 1980).
ARE SEVERANCE TAXES BASED ON GAS PRODUCED OR THE VALUE OF THE GAS STILL IN THE GROUND?
Severance taxes are only based on the gas produced or the quantity severed. Ark. Stat. Ann. 84-2102 (Repl. 1980).
IS A LANDOWNER WHO DRILLS HIS OWN WELL EXEMPT FROM PAYING SEVERANCE TAXES?
No.  A landowner who engages in the business of severing natural resources is a "producer" pursuant to Ark. Stat. Ann. 84-2101(f) and required to pay severance taxes pursuant to Ark. Stat. Ann. 84-2102 (Repl. 1980).
The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General David S. Mitchell.