Riley's Oil, Gas Severance Tax Bill Killed by House Panel

A bill introduced by Alabama Gov. Bob Riley that proposed to impose an oil and gas severance tax on GOM producers has been killed by the Alabama House Government Appropriations Committee.

As stated on Riley's web site, "the taxable value [of oil and gas] at the point of production is unknowable and can only be estimated by 'working back' from the price at the point of sale."

The "workback rule," which became effective April 1, 1997, was influenced by ExxonMobil's participation in a draft of the regulation, according to Riley.

"The recent Administrative Law Judge ruling will now allow all oil & gas producers to claim any and all direct and indirect costs, including transportation, processing, treatment and other costs," Riley stated in a "Fact Sheet" for the severance tax preservation bill. "The only production costs that are still not allowed are downhole costs -- all other costs are now considered either direct or indirect."

Riley claimed "this could conceivably reduce [oil and gas producers'] severance tax liability in future months to zero."

The Gadsden Times reported that Riley's Severance Tax Bill would double Alabama's tax gains by forcing oil and gas producers to pay for what they produce based on volume rather than value.

Alabama Rep. John Knight, D-Montgomery, told The Times that he would introduce a similar bill next week to replace Riley's attempt.

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