BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.25.1801 and 42.25.1809 pertaining to oil and gas tax rates

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

TO: All Concerned Persons

 

1. On May 22, 2018, at 11 a.m., the Department of Revenue will hold a public hearing in the 3rd Floor Reception Conference Room of the Sam W. Mitchell Building, located at 125 North Roberts, Helena, Montana, to consider the proposed amendment of the above-stated rules. The hearing room is most readily accessed using the east doors of the building facing Sanders Street.

 

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice.  If you require an accommodation, contact the department no later than 5 p.m. on May 11, 2018, to advise us of the nature of the accommodation you need. Please contact Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected].

 

3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

 

42.25.1801 DEFINITIONS In addition to the definitions found in 15-36-303, MCA, the following definitions apply to terms used in this chapter subchapter:

(1) through (13) remain the same.

 

AUTH:  15-36-322, MCA

IMP: 15-1-101, 15-36-301, 15-36-302, 15-36-303, 15-36-304, 15-36-305, 15-36-309, 15-36-310, 15-36-311, 15-36-312, 15-36-313, 15-36-314, 15-36-315, 15-36-319, 15-36-321, 15-36-326, 82-1-111, MCA

 

REASON: The department proposes amending ARM 42.25.1801 to correct the lead-in statement for the rule by changing the word chapter to subchapter. The definitions in this rule are specific to terms used in ARM Title 42, chapter 25, subchapter 18, not to the entire chapter 25. There are no substantive changes being proposed for the rule content.

 

42.25.1809 TAX RATES (1) Table I reflects the tax rates effective on October 1, 2006 through September 30, 2016, and includes the rates contained in as set forth in 15-36-304, MCA, and ARM 36.22.1242 by the Montana (Board of Oil and Gas Conservation). The rate is subject to change by the Board of Oil and Gas by rule.

 

Table I - Effective 10/1/2006

 

Table I - Effective through 9/30/2016

           

Type of Production	Working Interest	Nonworking Interest
(a) Natural gas
(i) Primary recovery production
(A) First 12 months of production	.76%	15.06%
(B) Pre-1999 wells after first 12 months of production	15.06%	15.06%
(C) Post-199 wells after first 12 months of production	9.26 %	15.06%
(ii) Stripper wells (averaging < 60 MCF/day)
(A) Pre-1999 wells	11.26 %	15.06%
(iii) Horizontally completed well production
(A) First 18 months of qualifying production	.76 %	15.06%
(B) After 18 months	9.26 %	15.06%
(b) Oil
(i) Primary recovery production
(A) First 12 months of production	.76 %	15.06%
(B) Pre-1999 wells after first 12 months of production	12.76 %	15.06%
(C) Post-1999 wells after first 12 months of production	9.26 %	15.06%
(ii) Stripper wells (averaging < 15 bbls/day)
(A) Pre-1999 and post-1999 wells first 1-10 bbls	5.76 %	15.06%
(B) Pre-1999 and post-1999 over 10 bbls	9.26 %	15.06%
(C) Pre-1999 and post-1999 stripper well exemption	.76 %	15.06%
(D) Pre-1999 and post-1999 stripper well bonus production	6.26 %	15.06%
(iii) Horizontally drilled
(A) Pre-1999 and post-1999 wells first 18 months	.76 %	15.06%
(B) Pre-1999 wells after 18 months	12.76 %	15.06%
(C) Post-1999 wells after 18 months	9.26 %	15.06%
(iv) Incremental production
(A) New or expanded secondary recovery production	8.76 %	15.06%
(B) New or expanded tertiary production	6.06 %	15.06%
(v) Horizontally recompleted wells
(A) Pre-1999 and post-1999 wells first 18 months	5.76 %	15.06%
(B) Pre-1999 wells after 18 months	12.76 %	15.06%
(C) Post-1999 wells after 18 months	9.26 %	15.06%

 

(2) Table II reflects the tax rates effective on October 1, 2016, as set forth in 15-36-304, MCA, and by the Montana Board of Oil and Gas Conservation in ARM 36.22.1242.

 

Table II - Effective 10/1/2016

 

Type of Production	Working Interest	Nonworking Interest
(a) Natural gas
(i) Primary recovery production
(A) First 12 months of production	.80%	15.10%
(B) Pre-1999 wells after first 12 months of production	15.10%	15.10%
(C) Post-1999 wells after first 12 months of production	9.30%	15.10%
(ii) Stripper wells (averaging < 60 MCF/day)
(A) Pre-1999 wells	11.30%	15.10%
(iii) Horizontally completed well production
(A) First 18 months of qualifying production	.80%	15.10%
(B) After 18 months	9.30%	15.10%
(b) Oil
(i) Primary recovery production
(A) First 12 months of production	.80%	15.10%
(B) Pre-1999 wells after first 12 months of production	12.80%	15.10%
(C) Post-1999 wells after first 12 months of production	9.30%	15.10%
(ii) Stripper wells (averaging < 15 bbls/day)
(A) Pre-1999 and post-1999 wells first 1-10 bbls	5.80%	15.10%
(B) Pre-1999 and post-1999 over 10 bbls	9.30%	15.10%
(C) Pre-1999 and post-1999 stripper well exemption	.80%	15.10%
(D) Pre-1999 and post-1999 stripper well bonus production	6.30%	15.10%
(iii) Horizontally drilled
(A) Pre-1999 and post-1999 wells first 18 months	.80%	15.10%
(B) Pre-1999 wells after 18 months	12.80%	15.10%
(C) Post-1999 wells after 18 months	9.30%	15.10%
(iv) Incremental production
(A) New or expanded secondary recovery production	8.80%	15.10%
(B) New or expanded tertiary production	6.10%	15.10%
(v) Horizontally recompleted wells
(A) Pre-1999 and post-1999 wells first 18 months	5.80%	15.10%
(B) Pre-1999 wells after 18 months	12.80%	15.10%
(C) Post-1999 wells after 18 months	9.30%	15.10%

 

(2)(3) The rate of tax set under Section 82-11-131, MCA, is at the provides for a maximum allowable tax rate of .3 percent of value. The rate enacted, up to the maximum allowable, is established by and subject to change by the Montana Board of Oil and Gas Conservation by rule.

 

AUTH: 15-36-322, MCA

IMP: 15-36-304, 82-11-131, MCA

 

REASON: The department proposes amending ARM 42.25.1809 to add a second tax rate table, in new (2). The new table reflects tax rate changes that were enacted by the Montana Board of Oil and Gas Conservation effective on or after October 1, 2016. The changes amount to a .04 percent increase over the rates shown in the previous table, in (1), that were in effect through September 30, 2016. The department is clearly distinguishing the old tax rates in the table in (1) from the new table in (2) because the old tax rates will be needed for utilization by taxpayers who elect to amend returns still in statute prior to October 1, 2016.

The department also proposes removing the specific reference to ARM 36.22.1242 from (1), because that rule was recently amended by the Montana Board of Oil and Gas Conservation and no longer reflects the rates that were in effect prior to October 1, 2016.

The department also proposes updating all existing references to the "Board of Oil and Gas" in the rule to the "Montana Board of Oil and Gas Conservation," to accurately reflect the board's full name.

The department further proposes revising the language in newly numbered (3) to remove redundancies and add missing detail. 

4. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected] and must be received no later than June 1, 2018.

5. Laurie Logan, Department of Revenue, Director's Office, has been designated to preside over and conduct this hearing.

 

6. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notice regarding a subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in 4 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

 

7. An electronic copy of this notice is available through the Secretary of State's web site at sos.mt.gov/ARM/register.

 

8. The bill sponsor contact requirements of 2-4-302, MCA do not apply.

 

9. Regarding the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will not significantly and directly impact small businesses. Documentation of this determination is available upon request from the person in 4.

 

 

/s/ Laurie Logan                               /s/ Mike Kadas

Laurie Logan                                   Mike Kadas

Rule Reviewer                                 Director of Revenue           

 

Certified to the Secretary of State April 17, 2018.