taxes

Crude Oil and Natural Gas Taxes Frequently Asked Questions

Tax Accounts

How do I close my crude oil or natural gas tax account?

Send a letter to Comptroller’s asking for your account to be closed. In your letter, include

  • the taxpayer identification number
  • name of your company
  • tax type(s)
  • reason the account needs to be closed
  • date the account should be closed

Email your letter to congtax@cpa.texas.gov or contact the Account Maintenance Division for additional information. Paper filers should blacken the final report box if using any of these forms:

Filing Tax Reports

Do I need to file a producer natural gas tax report on a yearly or monthly basis?
  • File monthly if you are a natural gas producer with an average monthly tax liability of $200 per month or $2,400 per year.
  • File annually if you are a natural gas producer with an average monthly tax liability of less than $200. By taxpayer request and with account examiner approval, natural gas producers can change their filing status from yearly to monthly if the average monthly tax liability is less than $200. This change in filing status is allowed provided the report period begins in January of the following year. Producers can only change their filing status from yearly to monthly or monthly to yearly on Jan. 1.
How can I be set up to file a monthly producer crude oil tax report?

A crude oil producer or operator must send a letter to the Tax Policy Division requesting approval to file monthly tax reports. Contact the Tax Policy Division toll-free at 1-800-531-5441, ext. 3-7393 for further information.

How do I determine the tax rate for my natural gas or crude oil lease?
  • Natural gas production from all leases is taxed at the standard 7.5 percent of net taxable value, unless a statutory exemption that lowers the rate applies.
  • Crude oil production from all leases is taxed at the standard 4.6 percent of net taxable value, unless a statutory exemption that lowers the rate applies. To determine if a natural gas or crude oil lease was approved for a statutory exemption, go to the CONG Web Inquiry system. Under the “Lease Search” heading, click on the “By Lease Number” link and enter the lease number and county code.
What is a regulatory fee? How is it calculated?

Natural Gas: Whenever a taxpayer reports as being liable for the tax for a lease, the oil field cleanup regulatory fee applies only to the reported volumes of raw gas (RG-1), lease use gas (LU-3), products (PR-6) and residue gas (RS-5). If both products and residue are reported on the same lease, the residue volume is not used to calculate the fee (residue reported without products is subject to the fee). The oil field cleanup regulatory fee is $0.000667 for each MCF (1,000 cubic feet) of gas produced.

Crude Oil: Whenever a taxpayer reports as being liable for the tax on a lease,

  • For report periods prior to September 2015, the regulatory tax and fee applies on crude oil produced and saved.
  • For report periods September 2015 and later, the taxable barrels are subject to the Oil Field Clean-Up Fee of $0.00625 (5/8 of a cent) per barrel.
  • For report periods September 2001 through August 2015, the taxable barrels are subject to the Regulatory Tax and Oil Field Clean-Up Fee amounts of .008125 (3/16 of a cent ($.001875) per barrel plus 5/8 of a cent ($0.00625) per barrel, equaling .008125).
Which party is liable for the tax on each lease? What happens if a purchaser withholds tax from the producer, but the purchaser does not pay the tax to the Comptroller’s office?
  • The natural gas statute in the Texas Tax Code, Section 201.251, Liability of Producer and Purchaser, and Section 201.252, Producer’s Remedy, applies.
  • The crude oil statute in the Texas Tax Code, Section 202.251, Liability of Producer and Purchaser, and Section 202.252, Producer’s Remedy, applies.

Account Reconciliation

I received a jeopardy determination for a report period. Why did I receive this, and who do I contact to discuss it?

Contact 1-800-531-5441, ext. 3.4455 to discuss the bill with an account examiner. Please have the tax type, taxpayer number and report period ready when you call.

Exemption Applications

How can I receive a tax credit from a low-producing gas well or low-producing oil lease (exempt type 11)?

Visit our website for detailed information on claiming a tax credit from a low-producing gas well, low-producing oil lease, and the latest average gas and oil prices.

The Comptroller approval letter for a specific lease states that the reduced rate for high cost gas will not apply since the one-year and two-year window requirements were not met. What does this mean? Also, what is a 10 percent penalty?

To recoup credits for previously paid tax on approved reduced tax rates for high cost gas leases, the information filed on credit-amended reports must meet all of the following criteria:

  • Four-Year Statute of Limitations: Credit-amended reports must be filed within four years from the due date of a production period.
  • Ten Percent Penalty: Form AP-180, Request for Approval of Reduced Tax Rate for High Cost Gas (PDF), must be filed the 180th day after the date of first production or the 45th day after the date of approval by the commission, whichever is later. If Form AP-180 is not filed by the applicable deadline, the tax deduction is reduced by 10 percent for the period beginning on the 180th day after the first day of production and ending on the date on which Form AP-180 is filed with the Comptroller.
  • One-Year Window Requirement: Credit-amended reports containing approved exempt high cost gas wells that have production periods prior to the Comptroller’s signature date must be filed by the first anniversary from the Comptroller’s approval date.
  • Two-Year Window Requirement: The total allowable credit for taxes paid for reporting periods before the date the application is filed cannot exceed the total tax paid on the gas that otherwise qualified for the tax reduction and that was produced during the 24 consecutive calendar months immediately preceding the month in which the application for certification was filed with the Texas Railroad Commission.

Refunds

How do I request a refund for natural gas or crude oil tax?

Information on filing a refund request for natural gas tax and for crude oil tax is available online.

Web Inquiry System

How can I view the Comptroller’s office data on my natural gas or crude oil tax account?

You can view tax report data, payments, refunds, account balances, report errors and data changes using the CONG Web Inquiry system. First time users can contact Comptroller’s office for registration assistance at 1-800-531-5441, ext. 3-4455. We may ask you to submit information via email for identification verification prior to registration.

Why does the Web Inquiry system indicate a report period is in error status? I don’t see any critical errors for the report period when I run the report error list.

In the report period flagged as being in error status, there is a variance between the reported totals and the calculated totals for one or more of the tax reports processed. For assistance, call the Comptroller’s office at 1-800-531-5441, ext. 3-4455 or email congtax@cpa.texas.gov.

Royalty Interest

I am a royalty interest owner of several natural gas leases, and I have not received payments for my royalties. How can I find out why I am not being paid my portion?

The Comptroller’s office has no legal authority involving issues relating to royalty interest owners and their royalty interest payments. However, the Comptroller’s office can assist in generating a list of the volumes and values that producers and purchasers report. The list shows which party paid the tax on a lease for specific production periods; royalty interest owners can use the list to determine when they should have been paid based on the volumes and values reported to the Comptroller’s office. Order the list by submitting an open records request at open.records@cpa.texas.gov. Include the Texas Railroad Commission (RRC) lease and county numbers and the production periods.

Additionally, you may use the RRC lease ID number or drilling permit number to look up this data on our CONG Web Inquiry system. Click either the “Lease Drop–Crude Oil” or “Lease Drop–Natural Gas” links, and complete the appropriate fields. No login is required for this feature.