Natural Gas Production Tax
A tax is imposed on the market value of gas produced and saved in the state by the producer.
Dec. 16, 2013 – Crude Oil and Natural Gas Credit Processing Announcement
The Comptroller's office has launched a program to ensure crude oil and natural gas taxpayers have access to qualified credits as quickly as possible. Learn more.
Low-Producing Well Exemption (Exempt Type 11)
Instructions and examples for reporting the low-producing well exemption are available online.
A reduced tax rate can apply if a well qualifies for an exemption that was certified by the Texas Railroad Commission. Certified exemptions and their reduced tax rates are:
- Two-Year Inactive Well Exemption – Tax rate of 0.0% (.000) of market value of gas applies;
- High-Cost Gas Reduced Tax Rate – Tax rate of 0.0% to 7.4% (.000 to .074) of the market value of gas applies. The tax 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 from the previous State fiscal year;
- Flared Gas Exemption – Tax rate of 0.0% (.000) of market value of casinghead gas from an oil well applies.
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.