April 25, 2013 10:19:17 AM
MCCOMB -- Legislation to lower the Mississippi severance tax on hydraulically fractured oil wells from 6 percent to 1.25 percent for first 30 months of well production has been signed into law by Gov. Phil Bryant.
House Bill 1698 also will allow counties where fracking is occurring to keep a larger share of tax proceeds. The law takes effect July 1.
Hydraulic fracturing is a technique used by the energy industry to extract oil and gas from rock by injecting high-pressure mixtures of water, sand or gravel and chemicals.
The Enterprise-Journal reports that several companies are conducting horizontal drilling operations in the Tuscaloosa Marine Shale formation in Amite and Wilkinson counties in southwest Mississippi.
Under the law, a county in which a horizontal oil well is located would get all the tax proceeds rather than sharing them with the state.
The law gives the tax break on a specific well for up to 30 months or until the well's costs have been recovered, whichever comes first. The law also gives a five-year tax break for oil exploration efforts.
Under current tax law, the state gets 6 percent in severance taxes and gives the counties 33 1/3 percent of the first $600,000, 20 percent of the next $600,000 and 15 percent thereafter.
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