Replies to This Discussion

Permalink Reply by The_Baron on August 17, 2010 at 7:23

First off all, a little clarification.

It is NOT a rebate.

It is a exemtion from severance tax. The exemtion lasts until payout OR two years have elapsed whichever occurs first. Any severance tax paid, prior to approval, is elligible for refund.

The wells I have been involved in that qualify, have had no severance tax deducted, as they qualify for the exemtion.

The operator must file with its application a list of costs that are used to calcualte the cost of the well. The state is very specific on what costs are allowed. Note: these are not the same costs that apply to a UMI, as UMI could bear additional costs that the state does not allow for its severance tax relif program, so this is not an accurate way for a UMI to verify well costs.

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Permalink Reply by adubu on August 17, 2010 at 7:39

Baron and Les--In Texas "High Cost Tight Gas" in some wells qualify for a reduction exemption for 10 years on % severance tax paid. Varies from Zero to 100% exemption of severance tax rate for NG which I beleive is 7.5%. Some wells for example pay 0%, 1% or 2.5% etc. variable rates and the exemption is good for 10 years some exemption only for 2 or 3 years then convert back to paying full severance taxes for life of well. Happy is in Texas we do not have to pay it in and then apply for refund we get it up front via reduction in taxes paid on production

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Permalink Reply by adubu on August 17, 2010 at 10:47

GD--glad you decided to hang around--- question in La.-- on tax returns severance tax deducted from royalty check therefore I assume your 1099 from operator gross royalty income for year would not have the severance tax amount included or is it itemized so later you will know amount to file refund for and then you offset it with deductable on your tax return, so later years when you file for refund is this now reportable income revenue for ferderal and state income taxes due? I glad in Texas We do not have deal with that double book keeping back and forth.

Permalink Reply by adubu on August 17, 2010 at 11:20

GD--yes I agree all is given to my CPA-- just a education question for the members to not over look this issue-- happy the state handles your paperwork they should since they get a little float time on your money.

Permalink Reply by w.r. frank on August 17, 2010 at 11:22

GD.

I hope you get your rebate soon! Several people I have talked to said their operator did not even apply for the rebate until (1) well paid out or (2) two years, whichever occurs first. If severance tax in fact doesn't have to be paid (i.e. is exempt), I can't imagine a good operator paying out good cash flow and then going through the administrative task to get a rebate. After all, depending on royalty percentage, 75% to 80% is paid by the operator. Until July 1, 2010, at some times over the last year that was 10% of the NG sales price.

Permalink Reply by w.r. frank on August 17, 2010 at 16:32

Henry,

Add this to your data bank. T13N, R11W. Red River Parish. Operator: HK. Gross Price direct from check stub:

11/09= $3.93
12/09= $4.07
1/10=$5.48
2/10= $5.13

The owner has a no cost royalty. The only deduction from Gross was $.331/mcf for Severance Tax.

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Permalink Reply by Les Bamburg on August 17, 2010 at 17:03

WR, do you have the Btu factors for these months so we can convert prices to $/MMBtu basis?

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Permalink Reply by w.r. frank on August 18, 2010 at 13:10

Statement was for two wells in two units. There is a column for MCF/BBL and the next column was BTU/GRAV. The statement covered eight months total and had MCF for each well for the months producing, but the BTU/GRAV column was totally blank for all months. These are both HA. horizontals and I presume dry gas with no premium or deduct.

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Permalink Reply by Two Dogs, Pirate on August 18, 2010 at 13:38

Looks like damn good figures to me, maybe the Hawk flies straiter than others.

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Permalink Reply by Henry on August 17, 2010 at 23:30

wrf
Thanks. If you can get me data for March/April/May/June, that would be great.

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Permalink Reply by w.r. frank on August 18, 2010 at 13:10

I am working on it.

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Permalink Reply by Henry on August 17, 2010 at 23:42

Here's where I stand on this discussion as of August 18: CONFUSED!

I'm asking all of the Chesapeake royalty owners to call/email Chesapeake and ask for an explanation of the price on their stub. Please start by asking what the gross price was that they received, and any/all deductions that brought the number down to the price on their monthly stub. I realize this may take a while, but I'm very patient. If we are going to get to the bottom of this, we need to understand this in better detail.

When you get the info, please either send it to me privately or post it on this board -- your choice.

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