Reporting for Stacked Laterals
As is the case with all leases approved for high cost gas, leases determined by the Texas Railroad Commission to be part of a stacked lateral well are required to be approved on the basis of the drilling and completion costs associated with drilling the specific well tied to each lease number. In this manner, natural gas produced from any stacked lateral well should be allocated to the appropriate lease number on the operator and/or purchaser’s tax reports.
In the event it is deemed impractical for natural gas to be allocated to the specific wells that the gas was produced from, the operator or purchaser should report their production under the “parent” lease number and pay the tax based on the applicable tax rate for this lease number. All value reported against this number will count against the accumulated savings statutory limitation of 50% of drilling and completion costs for this specific lease, regardless of where the gas was actually produced.
All subsequent wells that are completed and approved for high cost gas will benefit from the costs used to drill and complete the new well only. If a new application is not received for this well, the lease will not be approved for high cost gas.