1994 Oklahoma Senate Bill 841 and 1995 Oklahoma Senate Bill 495 allow for oil and gas operators to file for a gross production tax refund on the incremental production achieved based on a qualifying workover project. The production enhancement project must have began after July 1, 1994 but before July 1, 2012. Oil and gas operators can receive a gross production tax refund for 28 months from the date of completion of the production enhancement project.
The gross production tax refund is the amount of production that exceeds the average of the 12 months prior to the start of the qualifying project.
Refunds after June 30, 2003 must be filed within 18 months of when they are first eligible to be filed. 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.
Petroleum Accounting Consultants Managing Member Sean M. Hugo, CPA discusses the production enhancement tax exemption at a Marginal Well Commission seminar in August 2011.