Policy: Environment & Energy

Denbury fights tax on carbon dioxide extraction

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News,Business,Taxes,Energy and Environment

JACKSON, Miss. (AP) — Denbury Resources is fighting an attempt to tax carbon dioxide drilled from underground deposits in Mississippi, another in a series of efforts to penalize the oil producer for shipping carbon dioxide out of state instead of using it in Mississippi.

A House Ways and Means subcommittee held a hearing Monday on House Bill 1554, which would impose a 6 percent severance tax on carbon dioxide, in line with other gases extracted in Mississippi. Entities which pumped the gas into the ground to force up oil from old Mississippi oil fields would be reimbursed for the tax.

Though the bill has 56 House co-sponsors, its outlook is unclear, with it still in committee two days before the House must pass it to keep it alive. The tax would generate about $20 million a year, according to estimates discussed Monday.

The measure is a continuation of a heavily lobbied dispute that has raged throughout the 2014 Legislature. Denbury, based in Plano, Texas, has been attacked by opponents for shipping outside Mississippi about half the carbon dioxide it pumps from an underground reserve called the Jackson Dome, which lies north and east of the capital city.

Some Jackson Dome landowners supported now-dead bills to force Denbury to open its in-state pipelines to other shippers. They said that companies wanted to use the gas to extract oil from small fields that Denbury spurns as uneconomic.

Lawmakers specifically exempted carbon dioxide from severance taxes in the 1980s when an American arm of Royal Dutch Shell PLC began using it to breathe new life into played-out oil fields. Denbury took over Shell's interests, and in recent years has begun shipping carbon dioxide to oil fields and industrial users outside Mississippi.

Bill sponsor Rep. Gary Staples, R-Laurel, said Mississippi granted the tax break to encourage in-state activity, and should tax gas used elsewhere.

"The question is the 500,000 cubic feet a day going out of here in a pipeline to the state of Texas and there's no revenue to the state of Mississippi. We as the Legislature need to make sure we're doing our fair share," he said.

But Dan Cole, Denbury's vice president for marketing and business development, said fields in Mississippi that aren't being worked are too small or too far from current pipelines to be moneymakers.

Denbury supporters said it was unfair to say Mississippi is getting no benefits, because the company's capital spending budget is $400 million this year in Mississippi, it has 420 employees in the stateis paying royalties mineral rights owners for carbon dioxide, and paid $73 million in state taxes last year.

"I contend the state is getting something from what we do in the state of Mississippi, regardless of where the carbon dioxide goes," Cole said. "We're bringing so much more to the table than that, that it's almost laughable to be sitting here talking about this."

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Online:

House Bill 1554: http://bit.ly/1eqQFFf

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Follow Jeff Amy at: http://twitter.com/jeffamy

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