State Energy Revenues Update By Judy Zelio and Lisa Houlihan States that rely on natural resources for a substantial share of state revenues derive them from both state severance taxes and resource leases on federal lands within their borders. Severance taxes are excise taxes on natural resources "severed" from the earth. They are measured by the quantity or value of the resource removed or produced. In the majority of states, the taxes are applied to specific industries such as coal or iron mining and natural gas or oil production. They are usually payable by the severer or producer, although in a few states payment is made by the first purchaser. The taxes usually are imposed at a flat rate per unit of measure, with coal and ore mining taxes levied on a tonnage basis, oil production taxes on a per barrel basis, and gas production taxes on a per foot basis, although the rates may be graduated based on volume of production or value of the products. "Value" may mean market value in some states and gross value in others. Taxable net value or net proceeds are determined by deducting certain items from the gross value or gross proceeds. Examples of deductions include production costs, ad valorem taxes and royalties paid. Evaporation for gas wells also might qualify as a deduction. A variety of taxes appear under the general heading of severance taxes, as the following list from the Commerce Clearing House State Tax Guide demonstrates. Severance Taxes Imposed by States  Source: Commerce Clearing House State Taxes, 2006. List of Severance Taxes | Alabama Coal and lignite severance tax Coal severance tax Forest products severance tax Iron ore mining tax Local taxes Oil and gas conservation and production tax Oil and gas production tax | Alaska Fisheries business tax Fishery resource landing tax Mining license tax Oil and gas properties production tax Salmon enhancement tax Salmon marketing tax Seafood marketing assessment | Arizona Severance tax | Arkansas Natural resources severance tax Oil and gas conservation assessment Tax on minerals or timber taken from state lands | California Oil and gas production tax Timber yield tax | Colorado Oil and gas conservation tax Severance tax | Connecticut (No taxes imposed) | Delaware (No taxes imposed) | Florida Oil, gas, and sulfur production tax Solid minerals tax | Georgia Tax on phosphates | Hawaii (No taxes imposed) | Idaho Additional oil and gas production tax Oil and gas production tax Ore severance tax | Illinois Timber fee | Indiana Petroleum production tax | Iowa (No taxes imposed) | Kansas Mined-land conservation and reclamation tax Oil and gas conservation tax Severance tax | Kentucky Coal severance tax Natural resource severance tax Oil production tax | Louisiana Freshwater mussel tax Natural resources severance tax Oilfield site restoration fees | Maine Mining excise tax | Maryland Clam and oyster severance tax Local taxes Mine reclamation surcharge | Massachusetts (No taxes imposed) | Michigan Gas and oil severance tax | Minnesotax Local taxes Mining occupation tax Net proceeds tax Semitaconite tax Taconite, iron sulphides and agglomerate taxes | Mississippi Local taxes Oil and gas severance tax Salt severance tax Timber severance tax | Missouri Assessment on surface coal mining permittees | Montana Cement license taxes Coal severance tax Metalliferous mines license tax Micaceous minerals license tax Oil and gas conservation tax Oil and natural gas production tax Resource indemnity trust tax | Nebraska Oil and gas conservation tax Oil and gas severance tax Uranium tax | Nevada Minerals extraction tax Oil and gas conservation tax | New Hampshire Refined petroleum products tax | New Jersey (No taxes imposed) | New Mexico Natural gas processor's tax Oil and gas ad valorem production tax Oil and gas conservation tax Oil and gas privilege tax Oil and gas severance tax Resources excise tax Severance tax | New York (No taxes imposed) | North Carolina Oil and gas conservation tax Primary forest product assessment | North Dakota Coal severance tax Oil and gas gross production tax Oil extraction tax | Ohio Oil and Gas Marketing Program Assessment Resource severance tax | Oklahoma Oil, gas, and mineral gross production tax and petroleum excise tax | Oregon Forest products harvest tax Oil and gas gross production tax Privilege tax on eastern Oregon timber Privilege tax on western Oregon timber | Pennsylvania (No taxes imposed) | Rhode Island (No taxes imposed) | South Carolina (No taxes imposed) | South Dakota Conservation tax Energy minerals severance tax Precious metals tax | Tennessee Coal severance tax Local taxes Oil and gas severance tax | Texas Cement production tax Gas production tax Oil field cleanup regulatory fees Oil production tax Sulphur production tax | Utah Oil and gas conservation tax Severance taxes | Vermont (No taxes imposed) | Virginia (No taxes imposed) | Washington Enhanced food fish tax Uranium and thorium milling tax | West Virginia Severance taxes | Wisconsin Mining net proceeds tax Oil and gas severance tax | Wyoming Mining excise and severance taxes Oil and gas production charge | The leap in crude oil prices recently has had a noticeable effect on state severance tax collections reported to the Census Bureau. In 16 states, severance taxes accounted for at least 1 percent of state tax collections in 2007, with Alaska leading the pack. State Severance Taxes | | Collections in Millions | As a Percentage of State Tax Collections | | Collections in Millions | As a Percentage of State Tax Collections | | | State | 2004 | 2007 | | United States | $593,5 | 1.1% | Rank | $10,728.9 | 1.4% | Rank | Percent Change in Collections Between 2004 and 2007 | Alabama | $113.6 | 0.0% | 12 | $144.2 | 1.6% | 13 | 26.94% | Alaska | $646.9 | 50.2% | 1 | $2,216.0 | 64.4% | 1 | 242.56% | Colorado | $115.9 | 1.6% | 13 | $136.9 | 1.5% | 14 | 18.12% | Kansas | $98.1 | 1.9% | 11 | $132.3 | 1.9% | 11 | 34.86% | Kentucky | $187.1 | 2.2% | 10 | $275.3 | 2.8% | 10 | 47.14% | Louisiana | $476.6 | 5.9% | 7 | $904.2 | 8.3% | 7 | 89.72% | Mississippi | $53.8 | 1.0% | 15 | $81.8 | 1.3% | 15 | 52.04% | Montana | $83.5 | 5.1% | 9 | $264.7 | 11.4% | 5 | 217.01% | Nevada | $37.6 | 0.8% | 16 | $62.2 | 1.0% | 16 | 65.43% | New Mexico | $587.6 | 14.7% | 3 | $843.9 | 16.2% | 4 | 43.62% | North Dakota | $175.6 | 14.3% | 4 | $391.3 | 21.9% | 3 | 122.84% | Oklahoma | $655.1 | 10.2% | 5 | $942.1 | 10.6% | 6 | 43.81% | Texas | $1,896.8 | 6.2% | 6 | $2,762.9 | 6.9% | 9 | 45.66% | Utah | $47.8 | 1.1% | 14 | $101.5 | 1.7% | 12 | 112.34% | West Virginia | $204.1 | 5.4% | 8 | $328.3 | 7.1% | 8 | 60.85% | Wyoming | $683.2 | 45.4% | 2 | $803.6 | 39.7% | 2 | 17.62% | The other 34 states either have no severance taxes (15) or have severance taxes whose collections are less than 1% of total state tax collections (19). Sources: U.S. Census Bureau, State Tax Collections 2005 and State Tax Collections 2007. www.census.gov | Many states dedicate severance tax revenues to specific purposes, the most common being: Counties and other local governments (Colorado, Florida, Kansas, Kentucky, Louisiana, Mississippi, Montana, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, West Virginia, Wyoming) Conservation, reclamation and remediation (California, Colorado, Florida, Louisiana, Montana, New Mexico, Ohio, Oklahoma, West Virginia, Wyoming) Schools (Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, Texas, Utah). Miscellaneous other purposes, such as Medicaid state matching funds (West Virginia); water development projects (Colorado, North Dakota and Wyoming), and administration of oil and gas wells (Indiana). Alaska's Constitution does not allow dedicated funds except for the Permanent Fund.
A different, yet related revenue source is the state share of mineral revenues from leases on federal lands and federal offshore oil and gas tracts. States received $1.9 billion during the federal fiscal year (FFY) 2007 that ended Sept. 30, 2007, compared with $1.24 billion in FFY 2004 and $2.2 billion in FFY 2006. The Minerals Management Service (MMS), a federal agency responsible for collecting, auditing and disbursing revenues associated with mineral leases on federal and American Indian lands, makes monthly distributions to states as it collects royalties, rents, bonuses and other revenues. For the majority of onshore federal lands, states receive 50 percent of the revenues while the other 50 percent goes to various funds of the U.S. Treasury, including the Reclamation Fund for water projects. Alaska receives a 90 percent share as prescribed by the Alaska Statehood Act. According to the MMS, states use the money to fund local education, infrastructure projects and assistance to local counties where the energy production occurs. States may also receive appropriations from the offshore royalty-funded Land and Water Conservation Fund to help with park and land acquisitions. In addition, coastal states with producing federal offshore tracts adjacent to their seaward boundaries receive 27 percent of those mineral royalties. Remaining offshore revenues collected by the MMS are deposited in various accounts of the U.S. Treasury, with the majority of those revenues going to the general fund. As the table shows, Wyoming led in FFY 2007 distributions with $925.3 million as its share of revenues collected from mineral production on federal lands within its borders, including oil, gas and coal production. State Share of Revenues Collected from Mineral Production on Federal Lands and Federal Offshore Oil and Gas Tracts Adjacent to State Waters, FFY 2005 and FFY 2007 (in millions of dollars) | | FFY 2005 | FFY 2007 | Alabama | $15.6 | $14.2 | Alaska | $23.0 | $21.8 | Arizona | $0.0 | $0.04 | Arkansas | $7.1 | $8.1 | California | $23.4 | $61.2 | Colorado | $106.7 | $122.9 | Florida | $0.3 | $0.01 | Idaho | $1.7 | $4.7 | Illinois | $0.2 | $0.2 | Kansas | $2.0 | $1.9 | Kentucky | $0.1 | $0.7 | Louisiana | $32.5 | $24.0 | Michigan | $0.5 | $0.6 | Minnesota | $0.0 | $0.01 | Mississippi | $1.9 | $2.2 | Missouri | $0.6 | $3.6 | Montana | $35.6 | $39.2 | Nebraska | $0.0 | $0.02 | Nevada | $7.8 | $7.7 | New Mexico | $444.3 | $552.9 | North Dakota | $13.6 | $13.8 | Ohio | $0.4 | $0.49 | Oklahoma | $4.2 | $6.9 | Oregon | $0.0 | $0.6 | Pennsylvania | $0.0 | $0.06 | South Dakota | $0.6 | $1.0 | Texas | $15.8 | $21.7 | Utah | $87.4 | $135.4 | Virginia | $0.3 | $0.2 | Washington | $0.3 | $0.4 | West Virginia | $0.8 | $0.4 | Wyoming | $878.5 | $925.3 | United States | $1,700.0 | $1,972.3 | Sources: Minerals Management Service, press releases Nov. 3, 2005 and Dec. 4, 2007. Available: http://www.gomr.mms.gov/ and http://www.gomr.mms.gov/homepg/whatsnew/newsreal/2007/071204.pdf | Posted June 2008. Email statetax-info@ncsl.org for more information. Visitor counts for this page. |