Signal Oil and Gas - The New Incentives

 

Signal Oil and Gas  - The Incremental Production Incentive. Leases with wells that averaged seven BOE (barrels of oil equivalent) a day or less in 1996 are eligible for a fifty percent tax reduction on incremental production. The period from September 1, 1997 through December 31, 1998 will be used to determine any increase in production over the 1996 baseline level. The exemption is granted as long as the price of oil, as judged by the Comptroller, remains below $25 (adjusted to 1997 dollars). It is suspended if the price reaches $25 or above for three consecutive months and reinstated when it is below $25 for three consecutive months.Signal Oil and Gas

For the Incremental Production Incentive, the Commission will review all oil lease production records for calendar year 1996 and calculate the average daily BOE for each oil well. The BOE takes into account both oil and casinghead gas production, with six mcf (thousand cubic feet) of gas being equivalent to one barrel of oil. If, during the four highest months of a lease’s 1996 production, the production per day per well is no more than seven BOE, the lease is initially qualified. The Commission, during Fall 1997, will advise the operator of these leases that they are initially qualified.

Signal Oil and Gas  if, between September 1, 1997 and December 31, 1998, the production of an initially qualified lease exceeds the 1996 baseline BOE for four out of five consecutive months, that incremental production is used to derive an incremental production ratio. The Commission will certify that ratio which will be used by the Comptroller in calculating exempt production volumes. Primary, secondary, or tertiary techniques may be used; the primary production technique must involve an expenditure of at least $5,000. The operator of the initially qualified oil lease that has incremental production will apply to the Commission for certification. Signal Oil and Gas

For further information on the Incremental Production Incentive, contact Dorsey Twidwell of the Oil and Gas Division’s Production Services Section at 512-463-6742.

Signal Oil and Gas  - The Incentive to Market Previously Flared or Vented Casinghead Gas. If an operator markets casinghead gas that had previously been released into the air (vented or flared) for 12 months or more in compliance with Commission rules and regulations, the operator may receive a severance tax exemption on that gas for the life of the well. Operators will apply to the Railroad Commission for certification.

For further information on the Incentive to Market Previously Flared or Vented Casinghead Gas, contact David Triana of the Oil and Gas Division’s Permitting Services Section at 512-463-7307.

Signal Oil and Gas  - The Two-Year Inactive Well Incentive. This is comparable to the old Three-Year Inactive Well Incentive that was introduced in 1993. Under the new incentive, if an oil or gas well has been inactive (i.e., has no more that one month of production) during the preceding two years, any new oil, gas well gas, or casinghead gas production* may be eligible for up to a ten-year severance tax exemption. The program begins September 1, 1997 and ends February 29, 2000.

In Fall 1997, after receipt and processing of August 1997 production reports, the Commission will do a computer review of all oil lease and gas well records and identify those wells that have been inactive the preceding two years. At that time, operators of those wells will be informed of their potential eligibility for certification. Each month thereafter, as additional wells are identified as reaching the two-year inactive point, their operators will also be notified. If a well has not been automatically identified as being potentially eligible, an operator may apply through August 31, 1999 for certification.

Signal Oil and Gas  - Wells that have previously been certified as Three-Year Inactive Wells will not be re-certified under this program at this time.

 

 

 

 

 

 

 

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