(a)(1) There is hereby levied, to be collected hereafter, as herein provided, annual privilege taxes upon every person engaging or continuing to engage within the State of Alabama in the business of producing or severing oil or gas, as defined herein, from the soil or the waters, or from beneath the soil or the waters, of the state for sale, transport, storage, profit, or for use. The amount of such tax shall be measured at the rate of eight percent of the gross value of the oil or gas at the point of production except as provided in subsequent subdivisions of this subsection. Provided, however, that the tax on offshore production, produced from depths greater than 8,000 feet below mean sea level, shall not be computed as a percentage of gross value at the point of production, as provided in this article, but shall be computed as a percentage of gross proceeds, as provided in Article 1A of this chapter.
(2) Effective May 1, 1985, and thereafter, the incremental oil or gas production produced during a given year resulting from a qualified enhanced recovery project shall be taxed at the rate of four percent of gross value at the point of production of the incremental oil or gas production. The State Oil and Gas Board of Alabama shall approve the qualified enhanced recovery project and the determination of the projected annual oil or gas production that could have otherwise been produced without the benefit of the initiation of the qualified enhanced recovery project at a hearing held pursuant to Section 9-17-7, as amended, and shall notify the Alabama Department of Revenue thereof.
(3) All wells producing 25 barrels or less of oil per day or producing 200,000 cubic feet or less of gas per day shall be taxed at the rate of four percent of gross value of the oil or gas at the point of production.
(4) All oil and gas produced from onshore discovery wells, all oil and gas produced from onshore development wells on which drilling commenced within four years of the completion date of the discovery well and producing from a depth of 6,000 feet or greater, and all oil and gas produced from onshore development wells on which drilling commenced within two years of the completion date of the discovery well and producing from a depth less than 6,000 feet shall be taxed at a rate of six percent of the gross value of the oil and gas at the point of production for a period of five years from the date production begins from the discovery and development wells, provided, that all production to receive a six percent tax rate, which is produced from discovery wells, must be from discovery wells permitted by the State Oil and Gas Board of Alabama after July 1, 1984, and that all production to receive a six percent tax rate from development wells on which drilling commenced within the required time of completion of a discovery well, which was permitted after July 1, 1984, and the development well must also have been permitted after July 1, 1984; provided however, that the six percent tax rate applicable to a discovery well or development well shall be applicable to any replacement well drilled to replace the discovery well or the development well during the six percent five-year, tax rate period for only the remainder of the tax rate period.
(5) For any well for which the initial permit issued by the Oil and Gas Board is dated on or after July 1, 1988, except a replacement well for a well for which the initial permit issued by the Oil and Gas Board is dated before July 1, 1988, the rate provided in subdivision (1) of this subsection shall be reduced by 2 percent.
(6) For any well for which the initial permit issued by the Oil and Gas Board is dated on or after July 1, 1996, and before July 1, 2002, except a replacement well for a well for which the initial permit issued by the Oil and Gas Board is dated before July 1, 1996, the applicable rate shall be reduced by 50 percent for a period of five years commencing with commercial production after which subdivision (5) shall apply.
(b) The tax is hereby levied upon the basis of the entire production in this state, including what is known as the royalty interest, on which production the amount of such tax shall be a lien, regardless of the place of sale or to whom sold, or by whom used, or the fact that the delivery may be made to points outside the state; and the tax shall accrue at the time such oil or gas is severed from the soil or the waters, or from beneath the soil or the waters, and in its natural, unrefined or unmanufactured condition. Provided, however, that natural gas lawfully injected into oil or gas pools or reservoirs in the soil or beneath the soil or waters of the State of Alabama is exempt from this tax. Provided, further, that natural gas lawfully injected into the earth for the purpose of lifting oil or gas in the State of Alabama is exempt from this tax. However, if any 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 is exempt from this tax.
(c) A county, city, town, or municipality of the State of Alabama shall not establish, levy, impose, or collect, as a condition of doing business or otherwise, any tax, fee, license, or charge whatsoever, directly or indirectly, on or with respect to the production, treating, processing, ownership, sale, storage, purchase, marketing, or transportation on any oil or gas produced in the State of Alabama and on which severance taxes have been paid to the State of Alabama, or upon the business of producing, treating, processing, owning, selling, buying, storing, marketing, or transporting such oil or gas, or upon the ownership, operation, or maintenance of plants, facilities, machinery, pipelines, gathering lines, or any equipment whatsoever, which are, or may be, necessary or convenient to the production, treating, processing, ownership, storage, sale, purchase, marketing, or transportation of such oil or gas; provided, that nothing herein shall be construed to prohibit, limit or restrict a county, city, town, or municipality from imposing and collecting ad valorem taxes on any property, real or personal, not otherwise now exempted by law; further, the limitation herein imposed upon counties, cities, towns, and municipalities shall not apply to any county, city, town, or municipality which does not receive a share of the severance tax levied upon production other than offshore production as defined in Section 40-20-1 under the provisions of this article. The limitation herein imposed upon counties, cities, towns, and municipalities shall remain in full force and effect in regard to offshore production as defined in Section 40-20-1.
(d) Nothing contained herein shall be deemed to limit or to enlarge the authority of a county, city, town, or municipality to levy taxes or licenses on oil refining facilities located therein or on the suppliers of services or goods not including oil or gas to those persons engaging in the business of producing, treating, processing, owning, selling, buying, storing, marketing, or transporting such oil or gas. Provided, however, no such taxes or licenses shall be levied on offshore drilling or production facilities as defined in Section 40-20-1.
(e) In all cases of production of oil from unit operations as authorized and approved by the State Oil and Gas Board of Alabama, for purposes of computing the per well production, the aggregate production of oil from the entire unit shall be divided by the number of wells within the unit, including injection, disposal, and other wells utilized in unit operations, and the quotient thereof shall be deemed and declared to be the number of barrels of oil produced from each well in such unit regardless of the actual amount of oil per day produced from the well, if any.