Oklahoma 2000 Senate Bill 1048 provided oil and gas operators an incentive to use 3D Seismic technology to drill wells. Qualifying wells will receive a 6/7 refund of the severance taxes paid. Depending on when the 3D Seismic shoot was shot dictates the length of the severance tax refund that the oil and gas operator can receive. If the 3D Seismic was shoot prior to July 1, 2000 18 months of severance tax refunds can be obtained. However, if the 3D Seismic was shoot after June 30, 2000 the operator can receive 28 months worth of severance tax refunds.
Refunds will not be allowed if the average annual oil index price as calculated by the OTC exceeds $30/bbl, and if the average annual index price as calculated by the OTC for natural gas exceeds $5.00/MCF on an annual calendar year basis. This price cap is effective for all refund periods after July 1, 2008.
Sean M. Hugo, CPA Managing Member of Petroleum Accounting Consultants discusses the 3D Seismic severance tax refund at a recent Oklahoma Marginal Well Commission seminar.