006.05.212-GR-57. EXEMPTIONS FROM TAX - MANUFACTURING EXEMPTION - SPECIFIC BUSINESSES - REFININ...
AR ADC 006.05.212-GR-57Arkansas Administrative Code
Ark. Admin. Code 006.05.212-GR-57
006.05.212-GR-57. EXEMPTIONS FROM TAX - MANUFACTURING EXEMPTION - SPECIFIC BUSINESSES - REFINING AND EXTRACTING OIL, BRINE AND NATURAL GAS - SERVICES TO OIL, BRINE AND NATURAL GAS WELLS:
C. EXTRACTION. Machinery and equipment purchased to construct new oil, brine, or natural gas extraction plants or facilities in Arkansas, or machinery and equipment purchased to recomplete or redrill existing oil, brine, or natural gas extraction plants or facilities in Arkansas are exempt from tax if the provisions of this rule and GR-55 are satisfied. “Recomplete” or “redrill” shall have the same meaning as indicated in GR-57(F).
a. The extraction process for oil shall be considered as beginning with the erection of the drilling rig at the drilling location and shall be considered as terminating at the heater treater or settling tank immediately prior to transportation. Oil tanks used for storage alone shall be subject to tax.
b. The extraction process for natural gas shall be considered as beginning with the erection of the drilling rig at the location of the well and shall be considered as terminating once the gas has reached the Christmas tree. Once the gas has reached the bee catcher or separator for the first stage of removing impurities from the gas, refining has begun and shall be considered as continuing until the gas leaves the outlet on the discharge side of the final gathering compressor station. The pipeline from the outlet to the transmission line shall be subject to tax.
1. Drilling rigs. All machinery and equipment that becomes a component part of a newly constructed drilling rig, e.g., crown block, drill bit, drill string are exempt. However, any subsequent replacement of drilling rig components will be taxable unless the replacement is made in conjunction with a complete or substantial replacement of an entire drilling rig;
6. Brine Supply Well. New or rebuilt pump, motor, and protector when all three items are purchased to replace an existing pump, motor, and protector at the same time. However, if less than all three items are replaced at the same time, a “substantial replacement” has not occurred and the items purchased will be taxable.
F. SERVICES. The total gross receipts derived from the services of alteration, addition, cleaning, perforating, fracturing, refinishing, replacement, repair, rework or workover of any part of an existing oil, brine, or natural gas drilling rig or an existing oil, brine, or natural gas well are taxable as services performed upon manufacturing machinery and equipment. However, perforating, fracturing, and other completion services performed on a new well to begin initial production, or in conjunction with the redrilling or recompletion of an existing well, are not subject to tax.
1. Recompletion means completion operations performed in a source of supply that is separate and distinct from the source of supply in which the well was successfully completed prior to the commencement of the current completion operations, e.g., an existing well is perforated and fractured to initiate gas production from a new and different zone from the zone that was already producing.
4. Completion means the first configuring of the well inside the production casing and perforating of the casing to allow gas from the surrounding rock into the casing and to the surface. Completion services include running casing, cementing, logging, perforating, fracturing, acidizing, swabbing, and other special services depending on the characteristics of the formation.
Credits
AUTHORITY: Ark. Code Ann. § 26-52-402
Current with amendments received through May 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.05.212-GR-57, AR ADC 006.05.212-GR-57
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