Administrative Rules of Montana
Department 42 - REVENUE
Chapter 42.25 - NATURAL RESOURCES TAXES
Subchapter 42.25.18 - Oil and Gas
Rule 42.25.1804 - HORIZONTALLY COMPLETED OR RECOMPLETED WELLS

(1) For horizontally completed or horizontally recompleted wells the operator must provide to the department of revenue a copy of the horizontal certification from the board of oil and gas conservation. If the operator does not provide the certification, or the well is not certified by the board as horizontally completed, production from the well will be subject to the tax rates in ARM 42.25.1809(1) (b) (i) for oil wells, and 42.25.1809(1) (a) (i) for gas wells until such time as operator provides the certification to the department. If a certification is received by the department after the month in which production for sale first occurs, and the taxpayer has filed and paid taxes on production which is greater than would otherwise be due, a refund or credit will be granted to the taxpayer.

(2) Production from pre-1999 and post-1999 wells certified by the board to be horizontally completed will be subject to the tax rates in ARM 42.25.1809(1) (b) (iii) (A) for oil wells, and 42.25.1809(1) (a) (iii) (A) for post-1999 gas wells for the first 18 months following the last day of the calendar month immediately preceding the month in which production for sale from a crude oil or natural gas well is pumped or flows. Production from pre-1999 certified horizontal wells will be subject to the tax rates under ARM 42.25.1809(1) (b) (iii) (B) after the first 18 months of production unless it is a stripper producer or has incremental production. Production from post-1999 certified horizontal oil wells will be subject to the tax rates under ARM 42.25.1809(1) (b) (iii) (C) after the first 18 months of production unless it is a stripper producer or has incremental production. Production from post-1999 certified horizontal gas wells will be subject to the tax rates under ARM 42.25.1809(1) (a) (iii) (B) after the first 18 months of production.

Example : The first production for sale from a horizontally drilled oil well is February 18, 1998. February 1998 is considered the first month of production subject to the tax rates in ARM 42.25.1809(1) (b) (iii) (A), and the last month of the exemption will be July 1999. The first month of production subject to the tax rates in ARM 42.25.1809(1) (b) (iii) (B) in this example is August 1999. The tax rates in ARM 42.25.1809(1) (b) (iii) (A) will apply to the month in which production for sale first occurs regardless of when the operator provides a copy of the certification notice to the department.

(3) All production from wells certified by the board to be horizontally recompleted which have produced oil during the five years immediately preceding the month the well was horizontally recompleted will be classified as incremental and the tax rates in ARM 42.25.1809(1) (b) (v) apply.

(4) This section applies to a well reported as a pre-1999 oil well prior to recompletion as a horizontal well. For oil wells certified by the board to be horizontally recompleted, the tax rates in ARM 42.25.1809(1) (b) (v) (A) and (B) apply to the incremental production. The operator must provide a production decline rate approved by the board. If a well is in primary recovery after the first 18 months of production the well will be classified as a pre-1999 well, and the tax rates in ARM 42.25.1809(1) (b) (i) (B) will apply, or if qualified as a stripper well the rates in ARM 42.25.1809(1) (b) (ii) (A) and (B), or 42.25.1809(1) (b) (ii) (C) apply.

(5) This section applies to a well reported as a post-1999 oil well prior to recompletion as a horizontal well. For oil wells certified by the board to be horizontally recompleted, the tax rates in ARM 42.25.1809(1) (b) (v) (A) and (C) apply to the incremental production. The operator must provide a production decline rate approved by the board. If a well is in primary recovery after the first 18 months of production the well will be classified as a post-1999 well, and the tax rates in ARM 42.25.1809(1) (b) (i) (C) will apply, or if qualified as a stripper well the rates in ARM 42.25.1809(1) (b) (ii) (A) and (B) or 42.25.1809(1) (b) (ii) (C) apply.