Natural Gas Production Tax
A tax is imposed on the market value of gas produced and saved in the state by the producer.
You can lower your taxes owed if you qualify for an exemption certified by the Texas Railroad Commission. These exemptions and their reduced tax rates are:
- Two-Year Inactive Well Exemptions 0.0% of market value of gas;
- High-Cost Gas Reduced Tax Rate 0.0% to 7.4% (.000 to .074) of the market value of gas, the rate varies by well depending on how the well's drilling and completion costs compare to the median cost of all High-Cost gas wells (previous State fiscal year);
- Flared Gas Exemption 0.0% (.000) of market value of gas.
Multiple Severance Tax Exemptions
When an oil or gas well qualifies for multiple severance tax exemptions, a taxpayer may choose which incentive is most beneficial. For example, some gas wells now qualify for the low-producing well and high-cost gas incentives. Depending on the average price of gas, the low-producing well incentive can be lower than the high-cost gas reduced tax rate. Other months the high-cost gas incentive might be more beneficial.
A taxpayer may choose to report by using the Exempt Type (Type 11 or Type 05) that is most beneficial for a gas well for each individual report period, but both Exempt Types cannot be reported for the same well for the same period.
Enhanced Web tools available
The crude oil and natural gas Web inquiry system has several taxpayer tools to help taxpayers reconcile individual report periods.
Rate Details and Other Information
Gas: 7.5% (.075) of market value of gas.
Condensate Production Tax: 4.6% (.046) of market value of condensate.
Regulatory Fee: For report period prior to September 2001, 1/30 of a cent (.000333) for thousand cubic feet of gas produced. For report periods September 2001 and later, .000667 for thousand cubic feet of gas produced.
Monthly: 20th day of the 2nd month following the production month. Yearly, if qualified: February 20, for preceding year.