§40-20-22. Applicability; payment of and liability for taxes; reporting.

(a) The tax levied by this chapter and computed pursuant to Section 40-20-21 applies to all offshore production produced from depths greater than 8,000 feet below mean sea level, regardless of the method or place or timing of delivery or sale, or the manner or place of processing, or to whom sold, or by whom used, or the fact that the delivery, sale, or storage may be made at points outside the state, or the fact that processing or other preparation for sale, storage, or use occurs outside the state. It is the intent of this chapter that the tax is to be computed on the production of all offshore oil or gas in this state from depths greater than 8,000 feet below mean sea level, however the tax shall be computed only once on any given volume of such offshore production.

(b) Natural gas produced by offshore production in the State of Alabama that is lawfully injected into oil or gas pools or reservoirs in the soil or beneath the soil or waters of the State of Alabama for the purpose of lifting oil or gas in the State of Alabama is exempt from this tax. However, if any such gas so injected into the earth is sold for such purposes or injected into underground storage facilities as defined in Section 9-17-150 et seq., then the gas so sold or injected shall not be exempt from this tax. Natural gas lawfully vented or flared in connection with the production, treatment, or processing of oil or gas in the State of Alabama is exempt from this tax.

(c) The tax levied by this chapter and computed pursuant to Section 40-20-21 applies to the producers of offshore production in the proportion of their ownership at the time of severance, including what is known as the royalty interest. The tax shall be paid by the person in charge of the production operations, who is hereby authorized, empowered, and required to deduct from any amount due to producers of offshore production the proportionate amount of the tax levied by this chapter before making payments to the producers.

(d) When any person in charge of production operations shall use or dispose of the offshore production for fuel or any other purpose, he or she shall withhold the tax imposed by this chapter. If he or she is required to pay other interest holders, he or she is authorized, empowered, and required to deduct from any amounts due them the amount of tax levied and due under this chapter before making any payment to them.

(e) Every person in charge of production operations by which offshore production is severed from the soil or waters, or from beneath the soil or waters, of the State of Alabama who fails to deduct and withhold, as required by this section, the amount of tax from the sale or purchase price, when the offshore production is sold or purchased under contract or agreement, or on the open market, or otherwise, shall be liable to the state for the full amount of taxes, interest, and penalties due the state. The department shall proceed to collect the tax from the person in charge of production operations, under this chapter, as if he or she were the producer of the offshore production.

(f) The person in charge of the production operations shall report to the department the total monthly volumes and gross proceeds attributable to all offshore production produced during the month, including amounts attributable to royalty interests. If any gross proceeds are attributable to a producer who is exempt from tax, the operator shall be entitled to list the gross proceeds attributable to the exempt producer on his or her monthly tax return and subtract the exempt producer’s gross proceeds from the total gross proceeds in calculating the gross proceeds for which he or she is liable for the tax. A producer claiming an exemption from the tax shall apply to the department for the exemption in such manner as the department may reasonably require, and the department shall inform the producer and the person in charge of production operations of its determination.

(g) A person in charge of the production operations who delivers offshore production to a producer for marketing or otherwise disposing of its own oil or gas may report to the department the total monthly volumes delivered to each take-in-kind producer. The operator shall then be entitled to exclude the take-in-kind producer’s volumes from its calculation of the total non-market taxable volumes and from the calculation of the monthly gross proceeds for which he or she is liable for the tax. The operator shall report any other information about the take-in-kind producer as the department may reasonably require. The take-in-kind producer shall be responsible for reporting and remitting the tax levied by this chapter on the take-in-kind volumes.

(h) The tax computed under this article shall become due and payable in the same manner as the tax computed under Article 1 of this chapter and the tax shall constitute a first lien upon the offshore production so produced when in the possession of the producer or any purchaser of the oil or gas. In the event the person in charge of production operations fails to pay the tax, then the department may proceed against the producer or the purchaser to collect the tax.

(Act 2009-147, p. 284, §4.)