Mississippi cuts horizontal severance, EOR taxes

Mississippi has reduced the severance tax on hydrocarbons produced from horizontal wells and the sales tax paid on electricity for oil and gas produced via carbon dioxide enhanced oil recovery.

Starting July 1 until June 30, 2018, the severance tax on output from qualifying horizontal wells is reduced to 1.3% from 6% for 30 months or until payout of the well.

The bill, signed by Gov. Phil Bryant in late April, could benefit the emerging Tuscaloosa Marine shale unconventional oil play in which only a few wells have been drilled in southwestern Mississippi as well as several other formations, said the Mississippi Development Authority.

The severance tax could benefit Encana Corp., Goodrich Petroleum Corp., and other operators in the Tuscaloosa Marine shale play.

The bill sweetens economics for operators in the Tuscaloosa Marine shale in Mississippi, where fiscal terms that apply to that formation were more favorable than those in Louisiana even before Mississippi passed House Bill 1698 on Apr. 23 (OGJ, May 6, 2013, p. 48).

The Louisiana Geological Survey more than a decade ago estimated that the Tuscaloosa Marine shale might contain 7 billion bbl of recoverable oil (see map, OGJ, Dec. 29, 1997, p. 91). They estimated that the shale is 50 ft thick or more across 3.8 million acres in central Louisiana and southern Mississippi.

The first modern exploratory wells have been drilled in the play only in the last 3-4 years with the evolution of horizontal drilling combined with multistage hydraulic fracturing.

Many consider existing Mississippi EOR policy to the best in the US, the MDA said, but House Bill 841 decreases the sales tax paid on electricity to 1.5% for oil and gas produced in the state using CO₂. The bill will benefit Denbury Resources Corp., which has an extensive integrated CO₂ EOR program in Mississippi fueled by CO₂ from Jackson Dome that is injected into oil producing fields in Mississippi and other states.