landowner

Louisiana Severance Tax Relief Program

I have recently heard about the Louisiana Severance Tax Relief Program.  The Severance Tax Relief Program allows the suspension of severance taxes due on production from a qualifying well for a variable time period depending on the category.

 

The Office of Conservation certifies qualification under this program in four (4) categories, three (3) of which involve a Well Cost Statement:


1. Inactive Well
2. Deep Well
3. Horizontal Well
4. New Discovery Well.

If correctly applied for, a well fitting one of these categories would be eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

 

It seems to me that a Haynesville well that has been drilled on my section would fit into at least one of these categories.  However, my question is, are the drilling companies operating these wells required to apply for this severance tax relief program?  If so, wouldn’t it be wrong for them to charge me a severance tax deduction on my royalty check for a newly completed Haynesville Well?

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Permalink Reply by Buddy on March 24, 2010 at 8:24
Kate: I think that the State requires a detailed and itemized list of the well costs and that can't occur until after it is drilled and put on line. I know of several companies who have made application mid last year and still have not gotten it resolved.

landownerPermalink Reply by Kate Woodward on March 24, 2010 at 9:47
Buddy:
Thank you so much for taking the time to respond. I too was under the impression that the well cost statement is a very detailed process that takes requires a lot of information in order to be granted. However, the well that I am referring to has already been drilled, is on line, and has paid my family royalties for 2 months of production. And out of those two months of production, a severance tax was deducted from my check. I just wondered if it is MANDATORY that these companies apply for the relief and if so aren't I due those severance taxes back until the well has been paid for?

Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on March 24, 2010 at 12:01
Kate. I suspect that all the Haynesville operators are aware of the severance tax relief program. What has not been discussed here is the process and time frame. Have you contacted your operator? Phone calls are often less effective then emails. My suggestion is to find out the correct contact person and send them an email.

landownerPermalink Reply by Spring Branch,mineral owner on March 24, 2010 at 22:28
The Severance Tax Relief Program Is available in Louisiana as Kate Woodward described it in her post above as regards horizontal Haynesville wells. Two year exemption from severance tax or one times allowed well costs (costs for title opinions, for example are not allowed). If you talk to the Dept. of Conservation , the process is straightforward and approval of properly prepared applications is swift. If you talk to the Operators, the process is tedious and time consuming. The truth is likely somewherre in between. Under terms of several of my leases, I receive actual drilling and completion reports and I can tell you that costs do show up several months after wells are put on sales line. The Operators certainly want to be able to include these costs and as such aren't going to be too quick to file the paperwork with the Dept of Conservation and miss out on some cost exemption. The speed for getting the severance tax exemption approved and reimbursed varies by Operator. I can't tell if Chesapeake is withholding severance tax or not because they report no itemized costs on the revenue run. It is: Here is the revenue from the 100%......and here is your share. Petrohawk is still withholding the tax 5 months after sales, but they keep assuring me that they are getting close to completing the report. Exco and Camterra both got rapid approval of the exemption, stopped withholding and reimbursed me quickly.
I showed an accountant with Petrohawk in Houston how to go on Sonris and actually follow the appoval process of the Severance Tax Exemption on a well by well basis. She din't know that function was available! The Operators also blame slow reimbursement of the Severance tax refund on the fact that the paperwork is filed with the Department of Conservation, but the refunds have to come from the Department of Revenue. You know the drill ......it is the right hand, left hand caper. If there is any consolation, it is that the state is holding a lot more of the Operator's money than it is our money.

landownerPermalink Reply by Kate Woodward on March 26, 2010 at 5:24
Hi Spring Branch!
I really appreciate all of your information about this program. This has really given me a greater understanding how all of this all works. I have been on SONRIS to check which wells on my land have gotten approval under the program. My next question to you is about the next steps that you took to eventually get reimbursed for the severance tax that was deducted from your first royalty checks. For instance, if it appears that a well has NOT yet been approved, then did you contact the operator about it (by phone or thru letter?)? On the other hand, what if you do find out that a well has been approved, did you just wait for the operator to reimburse you? Again, thank you so much for your detailed response!

landownerPermalink Reply by Spring Branch,mineral owner on March 26, 2010 at 5:37
Kate, in both cases where I was remitted the severance tax that was withheld, I really didn't do anything, it just came. However , going forward, when I see that the severance tax relief has been approved on Sonris and I haven't received my $ yet, I will be calling or emailing the Operator to inquire when I might be expecting it. Have you figured oiut how to pull it up on Sonris? it is a little tricky.

landownerPermalink Reply by Kate Woodward on March 26, 2010 at 5:56
Yes I did! Again, thank your so much for your feedback to all of my questions! I am sure I will posting again soon!

landownerPermalink Reply by Bacon on March 27, 2010 at 4:03
Hey SB, would you mind posting the basics of how to find that on Sonris? Thanks.

landownerPermalink Reply by Spring Branch,mineral owner on March 27, 2010 at 8:52
I was wondering if anyone was going to ask, Bacon. I had about decided everyone knew how to get it off Sonris.

landownerPermalink Reply by Spring Branch,mineral owner on March 27, 2010 at 9:11
I typed in the inx but they didn't take. I'll type in the rather lengthly instructions later on this evening.

landownerPermalink Reply by Spring Branch,mineral owner on March 27, 2010 at 12:18
To find on Sonris, do the following:
Start by going to Sonris Main.......NOT Sonris Lite! In the top left hand corner, under "Database Access", left click on "CONSERVATION". Then under "WELL INFORMATION", left click on " Severance Tax Relief Information". At this point you may have to download an Oracle application which is free, but necessary. After it is downloaded, you will be on the Severance tax exemption page and your cursor will be flashing on "Serial Number". In order to type in the Serial number, you must depress the "F7" button on the top of your keyboard and then type in the serial number. To show you what it looks like, type in the serial number 239895 which is a well that has been approved. After typing in the serial number, depress the "F8" key at the top of the keyboard and the information about well # 239895 will appear.
Remember it is F7, serial number, then F8! This will tell you if the well has been Approved (A) or Denied (D), and also the well cost!
That should about do it and good luck to all!

Let me know if you have success using these directions. I think it is pretty valuable info!

landownerPermalink Reply by Bacon on March 28, 2010 at 2:08
Awesome! Thanks. Looks like I'm going to have to fire up the old PC as it doesn't seem to work on the Mac.

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