2010 Arkansas Code
Title 26 - Taxation
Subtitle 5 - State Taxes
Chapter 58 - Severance Taxes
Subchapter 1 - General Provisions
§ 26-58-101 - Definitions.

26-58-101. Definitions.

As used in this subchapter:

(1) "Acquired", when used in reference to the severance tax on timber, means the time when timber is first weighed or measured by a primary processor after severance;

(2) "Completion" or "completed" means the act of making a well capable of producing gas;

(3) "Conventional gas well" means any gas well that is not classified as a high-cost gas well;

(4) "Date of first production", when used in reference to a particular gas well, means the first day in the month that the gas well produces natural gas for sale;

(5) "Director" means the Director of the Department of Finance and Administration or any of his or her duly appointed deputies or agents;

(6) "High-cost gas" means natural gas that is:

(A) Produced from any gas well completed within a shale formation, including, but not limited to, the Fayetteville Shale, the Woodford Shale, the Moorefield Shale, and the Chattanooga Shale formations, or their stratigraphic equivalents, as described in published stratigraphic nomenclature recognized by the Arkansas Geological Survey;

(B) Produced from any gas well in which the production is from a completion that is located at a depth of more than twelve thousand five hundred feet (12,500 ft.) below the surface of the earth, where the term "depth" means the length of the maximum continuous drilling string of drill pipe used between the drill bit face and the drilling rig's kelly bushing;

(C) Produced from a tight gas formation;

(D) Produced from geopressured brine; or

(E) Occluded natural gas produced from coal seams;

(7) "High-cost gas well" means any gas well that is completed as a well capable of producing high-cost gas;

(8) (A) "Marginal gas", when used in reference to a conventional gas well, means all natural gas produced from the conventional gas well beginning on the date the conventional gas well is incapable of producing more than two hundred fifty (250) Mcf (one thousand cubic feet) per day, as determined by the Director of the Oil and Gas Commission using the current wellhead deliverability rate methodology utilized by the Oil and Gas Commission, during the calendar month for which the severance tax report is filed.

(B) "Marginal gas", when used in reference to a high-cost gas well, means all natural gas produced from the high-cost gas well beginning on the date the high-cost gas well is incapable of producing more than one hundred (100) Mcf (one thousand cubic feet) per day, as determined by the Director of the Oil and Gas Commission using the current wellhead deliverability rate methodology utilized by the Oil and Gas Commission, during the calendar month for which the severance tax report is filed.

(C) "Marginal gas" includes production from all zones and multilateral branches at a single well without regard to whether the production is separately metered.

(D) "Marginal gas" does not include gas produced from:

(i) A high-cost gas well during the thirty-six-month period provided in 26-58-127(b)(1);

(ii) A high-cost gas well during any allowed extension provided in 26-58-127(b)(2); or

(iii) A new discovery gas well during the twenty-four-month period provided in 26-58-127(a);

(9) "Marginal gas well" means any gas well that produces or is capable of producing marginal gas, as determined by the Director of the Oil and Gas Commission using the current wellhead deliverability rate methodology utilized by the Oil and Gas Commission;

(10) "Market value", when used in reference to the rate of severance tax on natural gas, means the producer's actual cash receipts from the sale of natural gas to the first purchaser less the actual costs to the producer of dehydrating, treating, compressing, and delivering the gas to the purchaser;

(11) "Natural resources" means all natural products of the soil or water of Arkansas including, but not limited to, asphalt, barite, bauxite, chalk, chert, clay, cinnabar, coal, diamonds, fuller's earth, natural gas, granite, gravel, gypsum, iron, lead ore, lignite, limestone, manganese and manganiferous ores, marble, marl, mussel shells, novaculite, oil, ochre, pearls and other precious stones, phosphate, salt, sand, shale, slate, shells, stone and stone products, sulphur, titanium ore, and zinc ore;

(12) "New discovery gas" means natural gas that is produced from a new discovery gas well;

(13) "New discovery gas well" means any conventional gas well that is completed as a well capable of producing gas;

(14) "Payout" means the date the cumulative working interest revenues from a high-cost gas well equal the sum of:

(A) All drilling and completion costs incurred in connection with the high-cost gas well; and

(B) All operating costs incurred or accrued in connection with the operation of the high-cost gas well during the period of cost recovery;

(15) "Point of severance" means the place at which transportation of timber or natural resources, excluding natural gas, has been or is about to be commenced for use or processing after being severed;

(16) "Primary processor" means any person, firm, corporation, or other entity engaged in business as a sawmill, chipper mill, stud mill, square mill, plywood or veneer mill, whole tree chipping mill, post, pole, or piling plant, charcoal plant, processed board mill, bolt working mill, pulp mill, planing or surfacing mill, or other mill or facility where timber first undergoes any processing after harvesting;

(17) "Producer" means any person, firm, receiver, or other fiduciary, corporation, or association, who or which engages in the business of severing natural resources or timber;

(18) "Purchaser" means any person, firm, receiver, or other fiduciary, corporation, or association, consignor, agent, or other dealer, by whatever name called, who or which acquires title outright or conditionally to any interest in severed natural resources or timber;

(19) (A) "Sever", "severed", or "severing" mean natural resources cut, mined, dredged, or otherwise taken or removed for commercial purposes from the soil or water.

(B) However, "sever", "severed", or "severing" as defined in this subdivision (19) do not apply to any natural gas returned to any formation, in recycling, repressuring, pressure maintenance operation, or other operation, for the production of oil or any other liquid hydrocarbon.

(C) Further, "sever", "severed", or "severing" as defined in this subdivision (19) do not apply to any hydrocarbons in gaseous or liquid form that are burned, used, consumed, or otherwise employed in oil and gas operations, including, but not limited to, secondary recovery operations and fuel for engines in the same leasehold, drilling, or production unit or unit area of a unitized reservoir from which such hydrocarbons are produced;

(20) "Tight gas formation" means any natural gas bearing formation that:

(A) Has previously been determined by Oil and Gas Commission orders or field rules to be a low permeability formation, including:

(i) Booneville and Chismville-OR# 84-2003-07;

(ii) Gragg-OR# 89-2004-07;

(iii) Waveland-OR# 86-2007-07;

(iv) Rich Mountain-OR# 304-2006-09;

(v) Mansfield-OR# 28-2003-03; and

(vi) Witcherville and Excelsior-OR# 103-2005-07;

(B) Is determined by the Director of the Oil and Gas Commission to have an estimated in situ permeability of one-tenth milliDarcy (0.1 mD) or less; or

(C) Is determined to be a tight gas formation by field rules, general rules, or orders issued by the Director of the Oil and Gas Commission;

(21) "Timber" means either softwood or hardwood species of trees suitable for use as sawlogs, pulpwood, veneer bolts or billets, stave bolts or billets, and splits, handle and other bolts or billets including chemical wood, cross ties, posts, poles, piling, chips, charcoal, or any now known or hereafter discovered use of wood or wood pulp;

(22) "Time of severance" means the date on which transportation of timber or natural resources, excluding natural gas, has been or is about to be commenced for their use or processing after being severed; and

(23) "Transporter" means any person, firm, receiver, or other fiduciary, corporation, or association, who or which transports severed natural resources or timber to any point within, across, or out of the State of Arkansas.