Is a landowner who leases his property for oil production obligated to pay severance tax on the royalty interest he receives? Q2) Are severance taxes based on gas produced or the value of the gas still in the ground? Q3) Is a landowner who drills his own well exempt from paying severance taxes? A

OPINION NO. 86-164 “April 30, 1986 . . . . . . 7M ae ' Honorable LL. L. "Doc" Bryan a : . State Representative a eee ee CET - 305 South Vancouver: | mw * _Russelleville, AR 72801 oe Dear Representative. Bryan: . This is in response to “your. opinion request regarding Arkansas' "Severance Tax Act", Ark. Stat. Ann. §84-2101 et. ‘ seq. (Repl. 1980). Each of the questions you posed is immediately followed with .a brief reply: ; IS A LANDOWNER WHO LEASES HIS PROPERTY FOR OIL PRODUCTION OBLIGATED TO PAY SEVERANCE TAXES ON THE ROYALTY INTEREST HE RECEIVES? Generally, the owner (lessor) is not required to directly pay any severance taxes because primary responsibilit lies with the producer (lessee). However, the owner's Clessor' 's) royalty interest may be subject to a lien should the producer (lessee) fail to pay all severance taxes due. The lessee (producer) is primarily obligated to pay all severance taxes including that amount which is the basis of the lessor's royalty interest. The producer (lessee) is required to deduct that "amount of the severance tax in respect thereto from any such royalty ~ - oe Ark, Stat. Ann. §84-2105 (Repl. 1980). - \ ARE SEVERANCE- TAXES BASED‘ ON’ GAS PRODUCED OR THE VALUE OF THE GAS STILL ‘IN THE GROUND? z: Severance taxes are only based on the gas produced or “r+ the quantity severed. Ark. Stat. Ann. §84-2102 (Repl. 1980). IS A LANDOWNER WHO pRi EXEMPT FROM PAYING SRE, oe WEL. No. A landowner who engages 7 ee severing natural resources is a ages, in| the business : Stat. Ann. §84-2101(£) and required to pay severance. Ark pursuant to Ark. Stat. Ann. §$84-2102 (Repl. 1980), taxes The foregoing opinion, which I hereby approve 28 prepared by Assistant Attorney General David S. meres was - Sincerely, STEVE CLARK Attorney General SC/DSM/1 jm