THE tions literature and several contains less than many exact suggesdetions and s veral le s tha xact descriptions of the incidence of an ad valorem severance tax on a mineral resource levied by a state which does not dominate the production of that mineral. Authors in several recently published articles reference Charles McLure's article which appeared in the symposium proceedings published in this Journal in September, 1978. 1 In that article McLure observes that, "It is far more likely that the (severance) tax would be borne in the short run by the owners of the firm extracting the resources and in the long run, when contracts are renegotiate, by owners of deposits of the resource." Later in the same article, McLure notes that, "While it is not inevitable that extraction generates large economic rents, it certainly seems likely that rents are generally greater in extraction than in processing. This being the case, taxes on extraction are more likely to be borne by recipients of economic rents and have little effect on output, whereas heavy taxes on processing a form of manufacturing can be expected to have devastating effects on output."3 Professor McLure may be correct in his assessment of the long-run incidence of state-levied ad valorem severance taxes, but the reason may be more complex than is apparent from the traditional public finance literature. However, this simple explanation will clarify certain points about the mineral extraction industry and provide a formal examination of McLure's conclusion. The following discussion is limited to the long-run impact of severance taxes on future extraction from wells