LITTLE ROCK (TB&P) — Despite the highly publicized exits of Southwestern Energy Inc. and BHP from the Fayetteville Shale, severance tax revenues from the Arkansas play have remained steady as consumption and demand for natural gas in the power sector continues to set new highs.
However, natural gas production levels in Arkansas have seen a slow decline without any rig activity in the Arkansas shale play. Also, New York Mercantile Exchange futures slid to a three-year low of $2.03 per million British thermal units (mmBtu) on Aug 8, well below the industry’s $3 breakeven level.
At the close of the fiscal year 2019 that ended June 30, Arkansas severance tax revenue rose 4.3% to $38.3 million compared to $36.6 million in fiscal 2018.
In the first month of fiscal 2020 that began July 1, severance tax revenue was down 18.3% to $2.23 million compared to $2.73 million in the same month a year ago, according to monthly data from the state Department of Finance and Administration (DFA).
In calendar year 2018, production of marketed natural gas in Arkansas was 601.1 Bcf, down 13.8% from 697 Bcf in the same period of 2017. That is the lowest level of natural gas before Act 145 of 2009 went into effect.
Under the current law, natural gas producers are taxed based on the market value of the natural gas produced within the state and at different tax rates depending on the categories of wells.
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