Current through Reg. 49, No. 12; March 22, 2024
(a) Purpose. The purpose of this section is
to provide a procedure by which an operator can obtain a 50% severance tax
reduction for five years on the incremental oil and casinghead gas production
from a qualifying lease.
(b)
Definitions. The following terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise:
(1) Oil lease--A commission-designated oil
lease to which the commission has assigned an identifying number.
(2) Production--Barrels of oil (including
barrels of gas liquids reported as production monthly on the appropriate form)
plus casinghead gas, where six thousand cubic feet of gas is the equivalent of
one barrel of oil, expressed in barrels of oil equivalent (BOE).
(3) Baseline production--An oil lease's
average BOE monthly production during the four highest months of production in
the time period from January 1, 1996, through December 31, 1996.
(4) Incremental production--Production from a
qualifying lease in excess of baseline production.
(5) Incremental production technique--
(A) any secondary or tertiary production
enhancement technique;
(B) any
primary production enhancement technique that an operator certifies required an
expenditure of at least $5,000 to cause increased production.
(6) Qualifying lease--A lease is a
qualifying lease provided that:
(A) the
commission has designated the lease as an oil lease and has assigned to it an
identifying number;
(B) production
from the lease, measured by dividing the sum of lease production during the
four-month period used to compute the baseline production by the sum of the
number of well-days during the same four-month period, is no more than seven
barrels of oil equivalent per day per well, excluding gas flared pursuant to
the rules of the commission; and
(C) after the operator performs an
incremental production technique, the lease shows incremental production for
four of five consecutive months on or after September 1, 1997, and before
December 31, 1998.
(7)
Incremental ratio--The amount of a qualifying lease's average monthly
incremental production during the four-month period used to meet the definition
of a qualifying lease divided by its average monthly total production during
the same four-month period.
(8)
Qualified incremental production--A qualifying lease's total monthly production
multiplied by the incremental ratio.
(9) Well-day--One well producing hydrocarbons
for one day.
(c)
Qualification for the tax reduction. An operator of a qualifying lease is
entitled to a 50% tax reduction on that lease's qualified incremental
production for five years provided that:
(1)
The operator of a qualifying lease applies to the commission for a
determination of an incremental ratio before February 11, 1999;
(2) The commission certifies an incremental
ratio;
(3) The operator provides to
the state comptroller the certified incremental ratio; and
(4) The operator applies to the state
comptroller for the tax relief provided by this section not later than one year
after the date the commission certifies the incremental ratio for a qualifying
lease.
(d) Request for
hearing. If the request for certification of an incremental ratio is denied
administratively, or if the operator does not agree with the administrative
determination of the amount of the incremental ratio, the applicant may request
a hearing. The request for a hearing must be filed within 20 days after the
date on which notice of the administrative decision is mailed to the operator.
The commission shall provide notice of the hearing to the applicant and to any
other affected person named by the applicant. After hearing, the examiner shall
recommend final action by the commission.