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Natural Gas Tax Revenue Surges on Higher PricesLock Icon

2 min read

The recent surge in natural gas prices has been an unexpected boon to state tax coffers, with just seven months’ worth of gross natural gas severance tax collections for this fiscal year more than doubling total revenue for the previous two fiscal years.

“While taxes paid at the gas pump receive most of the attention, the severance tax has quietly generated $44 million with three months of collection remaining this year,” Arkansas Department of Finance & Administration spokesman Scott Hardin told Whispers via email.

Gross Natural Gas Severance Tax Revenue

Fiscal Year Ending 06/30/2022*

Fiscal Year Ending 06/30/2021*

Fiscal Year Ending 06/30/2020*





















































*Since fiscal year 2009, the state has reported monthly severance tax totals by month collected. Previous totals were by month reported.
Source: Arkansas Department of Finance & Administration

The nine-month total for fiscal 2022 so far is $44 million, well up from $19 million for the whole of fiscal 2021 and $14 million for all of fiscal 2020. Monthly severance tax revenue topped $7 million in December and again in January, and has been above $4 million, a monthly sum never matched in fiscal 2020 or 2021, every month since last August.

Hardin said the increases “can be attributed directly to the rising price of natural gas. With more than $44 million collected through the first nine months of Fiscal Year 2022, we have already doubled the amount collected in Fiscal Years 2020 and 2021 combined.”

The Henry Hub natural gas spot price at midweek last week was about $6 per million British thermal units, more than double what it was in September 2019, though still a fraction of the heights it hit between 2000 and 2008. In those days, gas prices moved beyond $17 three different times, peaking at $21.18 in September 2005 before a boom in hydraulic fracturing unleashed a torrent of new gas supplies, glutting the market. In April 2020, as the pandemic took its economic toll, natural gas was at $1.80 per million BTU.

Hardin said fiscal 2022 will be the biggest year for severance tax collection since 2015, when the tax generated a record $78.6 million for the state.

The first $675,000 of each year’s severance collection goes into the state’s general fund, and 95% of remaining proceeds go to state highways.

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