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Oil and Gas Quarterly Distribution Reports


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West Texas Intermediate Crude Oil PricE


OIL INCENTIVES FOR 2nd Qtr 2017

The average price for a barrel of west Texas intermediate crude oil determines what oil incentives are available for that quarter. If the average price equals or is greater than $30, then the incentive for stripper oil is eliminated for that quarter (MCA 15-36-303(22)). If the average price is less than $54, then the stripper well exemption is available for that quarter (working interest taxed at 0.80%). If the average price equals or is greater than $54, then the stripper well bonus is available for that quarter (working interest taxed at 6.30%) (MCA 15-36-304(6)(d)). 


If the average price is less than $54, then the incentive for incremental oil production is available for that quarter.  This applies only to new or newly expanded secondary (working interest taxed at 8.80%) or tertiary projects (working interest taxed at 6.10%) approved by the board of oil and gas conservation on or after March 23, 2017 (Senate Bill 86).


The average price for a barrel is determined by dividing the total of the daily prices for west Texas intermediate crude oil for the calendar quarter by the number of days on which the price was reported in the quarter.

 

The average price for the quarter ending June 30, 2017 is $48.1038. This means that the incentives for stripper oil and the stripper well bonus are not available for this quarter. The following incentives are available for this quarter: stripper well exemption, recompleted horizontal production and incremental production.


For all oil leases qualifying under the stripper well exemption, the OSTR-X3 schedule will be used, and all working interest value will be filed in column I as stripper exemption production. 


The elimination of oil incentives does not affect the non-working interest owner, or royalty, tax rate of 15.10%.


Montana Code Annotated pages
Average Price - for the West Texas Intermediate Crude Oil Price


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Local Government Ad Valorem Taxes


COAL GROSS PROCEEDS TAX


A statewide 5% yearly flat tax is imposed on coal gross proceeds, pursuant to MCA 15-23-703. The gross proceeds of coal are determined by multiplying the number of tons produced by the contract sales price. One-half of the contract sales price of coal sold by a coal producer who extracts less than 50,000 tons of coal in a calendar year is exempt from taxation, pursuant to MCA 15-6-208.

FILING REQUIREMENTS

On or before March 31st of every year, each person or firm engaged in mining coal must file a statement of gross yield for every mine operated in the preceding year. The producer must pay 50% of the taxes due on or before November 30; the remaining 50% is due on or before May 31 of the following year. Forms are filed with the Department of Revenue. We strongly encourage you to file your Coal Gross Proceeds Tax (CGP) online through the TransAction Portal (TAP).

DISTRIBUTION OF COAL GROSS PROCEEDS TAX

The tax is collected by the local county treasurer. The revenue is proportionally distributed to the appropriate taxing jurisdictions in which production occurred based on the total number of mills levied in fiscal year 1990.

 


METAL MINES GROSS PROCEEDS TAX


A yearly ad-valorem tax is imposed on the gross proceeds of metal mines, pursuant to MCA 15-23-801. Gross proceeds means the monetary payment or refined metal received by the mining company from the metal trader, smelter, roaster, or refinery, determined by multiplying the quantity of metal received by the quoted price for the metal and then subtracting basic treatment and refinery charges, quantity deductions, price deductions, interest and penalty, metal impurity, and moisture deductions as specified by contract. The taxable value of metal mines is equal to 3% of annual gross proceeds. This amount is subject to local mill levies in the jurisdiction in which the taxable value of the mining operation is allocated. Mines that produce less than 20,000 tons of ore in a year are exempt from property taxation on one-half of the merchantable value, pursuant to MCA 15-6-208.

FILING REQUIREMENTS

On or before March 31st of every year, each person or firm engaged in mining metals must file a statement showing the total gross proceeds of metal mined during the preceding calendar year.  Forms are filed with the Department of Revenue.  We strongly encourage you to file your Metal Mines Gross Proceeds Tax (MMG) online through the TransAction Portal (TAP).

DISTRIBUTION OF METAL MINES GROSS PROCEEDS TAX

This tax is collected by the local county treasurer. The taxable valuation of hard-rock mining operations is subject to allocations specified by hard-rock mining impact property tax base sharing laws. Generally, the tax base is allocated to taxing jurisdictions based on their associated relative economic impacts.

 


MISCELLANEOUS MINES NET PROCEEDS TAX


A yearly ad-valorem tax is imposed on the net proceeds of gems, vermiculite, bentonite or other valuable minerals, pursuant to MCA 15-23-501. The taxable value is equal to 100% of the annual net proceeds with the exception of talc, vermiculite, quicklime and rougher garnet concentrate. For these four minerals, the taxable value is derived by multiplying the number of tons produced by a specific price calculated each year as directed by statute. The taxable value is then multiplied by the local mill levy, which results in the tax owed. Sand and gravel are exempt from mines net proceeds taxation. Producers of industrial garnets, travertine and building stone, pursuant to MCA 15-23-518 and 15-6-208, are exempt from mines net proceeds taxation on their first 1,000 tons of production.

FILING REQUIREMENTS

On or before March 31st of every year, each person or firm mining miscellaneous minerals must file a statement showing the total gross proceeds of minerals mined during the preceding calendar year.  Forms are filed with the Department of Revenue.  We strongly encourage you to file your Misc. Mines Net Proceeds (MMN) online through the TransAction Portal (TAP).

DISTRIBUTION OF MISCELLANEOUS MINES NET PROCEEDS TAX

The local county treasurer collects the tax. The net proceeds of miscellaneous mines are subject to mill levies of those taxing jurisdictions in which the mine is located. The tax is distributed on the basis of relative mills levied by all jurisdictions levying taxes in the area.

 


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Natural Resource Taxes


Overview

Historically, Montana has relied on its store of natural resource wealth as a primary source of tax revenue. So significant is this source of revenue, that it has been likened to the "third leg" of Montana's tax stool, supplementing the individual income and property tax as the three major sources of revenue in the state. Generally, natural resource taxes may be categorized as either severance/license taxes or some form of ad valorem tax.


CEMENT AND GYPSUM PRODUCERS LICENSE TAX


Producers and importers of cement and cement products are required to pay a quarterly license tax of 22 cents per ton. Producers and importers of gypsum and gypsum products are required to pay 5 cents per ton. Individuals retailing cement and gypsum products in Montana must pay a license tax of 22 cents and 5 cents, respectively, for every ton that has not been paid for under any other law.

FILING REQUIREMENTS

Producers, manufacturers, and importers shall file quarterly returns showing the number of tons of cement or gypsum produced, manufactured, or imported. The returns, along with the tax due, must be submitted within 30 days following the end of each calendar quarter. We strongly encourage you to file your Cement and Gypsum Tax (CGT) online through the TransAction Portal (TAP).

DISTRIBUTION OF CEMENT AND GYPSUM PRODUCERS LICENSE TAX

The Department of Revenue collects the tax. All proceeds from the tax are deposited in the state general fund.

 


COAL SEVERANCE TAX


TAX RATES

The coal severance tax is imposed on all coal mined in Montana, pursuant to MCA 15-35-103. Producers of more than 50,000 tons of coal per year pay a quarterly severance tax on all production in excess of 20,000 tons. Producers of less than 50,000 tons per year are exempt from the tax.

 

Tax rates depend on the heat content (BTUs per pound) of the coal and the method of extraction.

Surface Mined Coal:

Under 7,000 BTUs  = 10% of value

7,000 and over = 15% of value

 

Underground Mined Coal:

Under 7,000 BTUs = 3% of value

7,000 and over = 4% of value

 

VALUE OF COAL

The value of coal to which the severance tax is applied is the "contract sales price". The contract sales price is the price of coal extracted and prepared for shipment f.o.b. mine, less that amount required to pay production taxes. Production taxes include the state severance tax, the resource indemnity trust and ground water assessment tax, local gross proceeds taxes, federal reclamation taxes, and the federal Black Lung Tax. The contract sales price includes royalties up to $0.15 per ton paid to federal and state governments, or Indian tribes, and all royalties paid to other mineral rights owners.

FILING REQUIREMENTS

Coal mine operators are required to file quarterly returns containing information sufficient to calculate the tax due.  The returns, along with the tax due, must be submitted within 30 days following the end of each calendar quarter.  We strongly encourage you to file your Coal Severance Tax (CST) online through TransAction Portal (TAP).

DISTRIBUTION OF COAL SEVERANCE TAX

The Department of Revenue collects the tax.  The taxes collected are distributed pursuant to MCA 15-35-108.

 


ELECTRICAL ENERGY PRODUCERS LICENSE TAX


A quarterly tax is imposed on any business engaged in the generation of electrical energy. The tax is $.0002 per kilowatt-hour of electrical energy generated, manufactured or produced.

FILING REQUIREMENTS

Producers of electricity shall file quarterly returns showing the amount of electricity produced except for necessary plant use.  The returns, along with the tax due, must be submitted within 30 days following the end of each calendar quarter.  We strongly encourage you to file your Electrical Energy Producers License Tax (EEL) online through the TransAction Portal (TAP).

DISTRIBUTION OF ELECTRICAL ENERGY PRODUCERS LICENSE TAX

The Department of Revenue collects the tax. All proceeds are deposited in the state general fund.

 


METAL MINES LICENSE TAX


Mining operations in which metal or gems are extracted are subject to a license tax, which is based on the gross value of the product.

GROSS VALUE

The value to which the tax rate is applied is the monetary payment the mining company receives from the metal trader, smelter, roaster, or refinery. This is determined by multiplying the quantity of metal received by the metal trader, smelter, roaster, or refinery by the quoted price for the metal and then subtracting basic treatment and refinery charges, quantity deductions, price deductions, interest and penalty, metal impurity, and moisture deductions as specified by contract between the mining company and the receiving metal trader, smelter, roaster, or refinery. Deductions are also allowed for the cost of transportation from the mine or mill to the smelter, roaster, or refinery.

Concentrate shipped to a smelter, mill or reduction work is taxed at 1.81% of gross value over $250,000. Gold, silver or any platinum-group metal that is dore, bullion matte or other form of processed concentrate that is processed in a treatment facility owned or operated by the taxpayer and that is sold or shipped to a refinery for final processing is taxed at 1.6% of gross value over $250,000. Gross value under $250,000 is exempt from metal mines license taxation and instead would be subject to the Resource Indemnity and Ground Water Assessment Tax (RIT) at a rate of 1/2 of 1%, pursuant to MCA 15-38-104.

FILING REQUIREMENTS

Persons extracting metals are required to file returns containing information sufficient to calculate the tax due. Returns and payments of metal mines license tax are due semi annually for the products produced in the preceding 6 months. The return for period ending June 30 is due and payable by August 15. The return for period ending December 31 is due and payable by March 31.  We strongly encourage you to file your Metal Mines License Tax (MML) online through the TransAction Portal (TAP).

DISTRIBUTION OF METAL MINES LICENSE TAX

 The revenue collected during the biennium is deposited as follows: 47% in the General Fund; 8.5% in the hard-rock mining reclamation debt service fund; 7% in the natural resources operations state special revenue account; 2.5% in the hard-rock mining impact trust account; and 35% to the county or counties identified as experiencing fiscal and economic impacts under an impact plan. If no such plan has been prepared, that same 35% goes instead to the county in which the mine is located.

 


MICACEOUS MINERAL MINES LICENSE TAX


The operation of any mine extracting micaceous minerals is subject to a quarterly license tax. Micaceous minerals are those that are generally classified as complex silicates, and include such minerals as vermiculite, perlite, kernite, maconite, bauxite, etc., pursuant to MCA 15-37-201.

TAX RATE

5 cents per ton of concentrates mined, extracted, or produced.

FILING REQUIREMENTS

Operators of micaceous mineral mines are required to file quarterly returns showing the number of tons of micaceous minerals mined. The returns, along with the tax due, must be submitted within 30 days following the end of each calendar quarter.

DISTRIBUTION OF MICACEOUS MINERAL MINES LICENSE TAX

All proceeds from the micaceous mineral mines license tax are deposited in the state general fund.

 


OIL AND NATURAL GAS PRODUCTION TAX


There is a quarterly tax on the gross taxable value of oil and natural gas production. The 1995 Montana Legislature replaced existing extraction taxes on all oil and natural gas production with a single production tax based on the type of well and type of production. This tax has been effective since January 1, 1996. The 1999 legislature further simplified the tax by consolidating the number of rates. There are various rates based on the type of well, type of production, working or non-working interest, date when production began, and price of west Texas intermediate crude oil. All oil and gas tax rates were changed in the 4th Quarter of 2016.

VALUE OF OIL

Total gross value is computed as the product of the total number of barrels produced each month and the average well head value per barrel. Producers are allowed to deduct any oil produced that is used in the operation of the well.

VALUE OF GAS

Total gross value is computed as the product of the total number of cubic feet produced each month and the average well head value per cubic foot. Producers are allowed to deduct any natural gas produced that is used in the operation of the well.

ROYALTIES EXEMPT

Royalties received by an Indian tribe from on-reservation oil production pursuant to a lease entered into under the Indian Mineral Leasing Act of 1938, and all governmental royalties, including ONRR, State of Montana, or county and municipal governments in Montana, are exempt from taxation.

FILING REQUIREMENTS

Oil and natural gas producers are required to file quarterly returns containing information sufficient to calculate the tax due. The returns, along with the tax due, must be submitted within 60 days following the end of each calendar quarter.  We strongly encourage you to file your Oil and Gas Natural Production Tax (COG) online through the TransAction Portal (TAP).  New operators can contact our office at (406) 444-6900 for assistance.

DISTRIBUTION OF OIL AND NATURAL GAS PRODUCTION TAX

In the 2003 legislative session, HB748 changed the method of oil and gas revenue distribution. There are now set percentage splits for each county, with the overall average being approximately 50% to local governments and 50% to support state government. The actual percentage splits can be found in MCA 15-36-331.

PRODUCTION INCENTIVES

Incremental production from secondary and tertiary recovery projects are taxed at reduced rates.  These reduced rates apply when the average price for west Texas intermediate crude oil is less than $30 per barrel.  Production from stripper wells is taxed at reduced rates.  The first 12 months of production from a newly drilled conventional well and the first 18 months from a horizontally completed or horizontally re-completed well are taxed at reduced rates.

 


RESOURCE INDEMNITY TRUST AND GROUND WATER ASSESSMENT TAX (RIT)


All businesses engaged in mining or extracting mineral resources within Montana are subject to an annual tax on the percentage of the gross value of the product, pursuant to MCA 15-38-104. The tax rates are as follows: talc 4.0%; coal 0.4%; vermiculite 2.0%, quicklime 10%, industrial garnet 1%; all others 0.5%. There is a minimum annual tax of $25. This tax is in addition to all other applicable license or severance taxes.

FILING REQUIREMENTS

All extractors and producers of minerals must file an annual statement showing the gross yield of product for each mineral mined. Metal producers are required to file on or before March 31. All other producers are required to file on or before the 60th day following the end of the calendar year. The tax due must be paid at the time of filing the statement of gross yield. We strongly encourage you to file your Resource Indemnity Trust Tax (RIT) online through the TransAction Portal (TAP).

EXEMPTIONS

Metal production subject to the metal mines license tax is exempt from RIT, pursuant to MCA 15-38-113. Royalties received by an Indian tribe, by the U.S. government as trustee for individual Indians, by the U.S. government, by the State of Montana, or by a county or municipality in Montana are exempt from RIT. Oil and natural gas production tax rates include RIT, and therefore a separate RIT filing form is not required.

DISTRIBUTION OF RESOURCE INDEMNITY TRUST AND GROUND WATER ASSESSMENT TAX

The resource indemnity trust fund was created to indemnify the citizens of Montana for the loss of long-term value resulting from the depletion of natural resource bases and for environmental damage caused by mineral development. The fund is managed by the state Board of Investments.