Low Producing Oil Leases and Gas Wells Eligible for State Tax Credits

Oil produced during May 2020 from a qualified low-producing oil lease is eligible for a 50% credit on the oil production tax based on the Texas Comptroller’s certification of average taxable prices for gas and oil published in the Texas Register on July 3, 2020. Gas produced during May 2020 from a qualified low-producing well is eligible for a 100% credit on the natural gas production tax. 

For the February 1-April 30, 2020 reporting period, the Comptroller determined that the average taxable prices was $24.27 per barrel for crude oil and $0.91 per one thousand cubic feet for natural gas. These prices are the basis for qualifying for low-producing tax credits for May 2020 production.

To qualify for the tax credits, these criteria must be met:

  • A low-producing oil lease is defined as a well that is classified as an oil well and part of a lease with production during a 90-day period of less than 15 barrels of oil per day or five percent of recoverable oil per barrel of produced water.
  • A low-producing gas well is defined as one that has production during a three-month period of no more than 90 mcf per day, excluding gas flared.

Production per well per day is determined by computing the well’s average daily production using the greater of the monthly production as reported a) in monthly well production reports to the Texas Railroad Commission; or b) in producer’s reports to the Texas Comptroller.

For more information about state taxes for qualified low-producing oil leases and gas wells, contact us.

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