TAX CREDIT FOR QUALIFYING LOW-PRODUCING GAS WELLS

Texas law provides a natural gas tax credit for low-producing gas wells for qualifying report periods.

Qualifications

1. Production from a gas well for the prior three months cannot exceed an average of 90 Mcf per day, excluding gas flared pursuant to the rules of the Texas Railroad Commission.
2. Production per well per day is determined by computing the average daily production from the well using the greater of the monthly production from the well as reported on:
   • the monthly well production reports filed with the Texas Railroad Commission, including amended reports; and
   • the monthly tax reports, including amended reports that are filed by producers and purchasers with the Comptroller’s office and who report as liable for tax.
   Production reports not filed with the Texas Railroad Commission and the Comptroller’s office for any of the prior three months will cause the well to be ineligible for the tax credit.
3. Taxpayers must file Form AP-217, Texas Well Credit Application (PDF) for approval of the tax credit for a low-producing gas well, and all the required information must be provided. Any information listed below that is not provided in Form AP-217 will result in a delay in the approval process which could potentially cause a denial of a tax credit.
   
   

   Form AP-217 – Required Information	Description
   Taxpayer number	Texas 11-digit taxpayer number assigned by the Comptroller’s office.
   Lease information from Railroad Commission’s records	Lease name and well number; Six-digit lease identification number; District number; County name and Comptroller’s county code; Eight-digit API number; and Well completion date.
   List the three months that were prior to the beginning date of the tax credit for the qualifying low-producing well	Example – The report period for the qualifying low-producing well began June 2020. The three months prior to June 2020 listed in Form AP-217 are March, April, and May 2020.
   Attached document, if applicable	Form 01-137; Power of Attorney (PDF).
   Information from authorized individual	Name and title; Phone number; Email address; and Signature and signature date.

Certified Average Gas Price

• The amount of tax credit can be 25 percent, 50 percent, or 100 percent and is based upon the Comptroller-certified average gas price posted on this webpage each month.
• The average gas price is based upon daily index prices for the prior three months for each report period.

Four-Year Statute of Limitations

• Four years from the due date of a report period determines the four-year statute of limitation date.
• Form AP-217 and tax reports must be postmarked by the four-year statute of limitation date of the qualifying report period.
• The four-year statute of limitations does not apply to the prior three months listed on Form AP-217.

Casinghead Gas and Condensate

Production of casinghead gas from an oil well and condensate from a gas well are not eligible for the tax credit of a low-producing well.

Filing Instructions and Examples for Qualifying Low-Producing Wells

• Electronic filers
• Paper filers

Price Conditions

Gas from qualified wells becomes eligible for different levels of credit from natural gas tax based upon the Comptroller-certified average price for the reporting month.

Average Taxable Gas Price	Credit
More than $3.50	No credit
Over $3 to $3.50	25 percent credit
Over $2.50 to $3	50 percent credit
$2.50 or less	100 percent credit

The Comptroller-certified average price of gas to be used in these calculations will be posted in the Texas Register and on this website. When the average price falls within one of the categories listed above, gas will be allowed the corresponding level of Credit for that reporting month.

Pricing Schedules and Credit Eligibility by Month

2024

Report Period	Price of Gas	Eligibility
October 2024	$1.01/Mcf	Eligible for 100 Percent Credit
September 2024	$1.12/Mcf	Eligible for 100 Percent Credit
August 2024	$1.15/Mcf	Eligible for 100 Percent Credit
July 2024	$1.19/Mcf	Eligible for 100 Percent Credit
June 2024	$1.24/Mcf	Eligible for 100 Percent Credit
May 2024	$1.06/Mcf	Eligible for 100 Percent Credit
April 2024	1.10/Mcf	Eligible for 100 Percent Credit
March 2024	$1.16/Mcf	Eligible for 100 Percent Credit
February 2024	$1.39/Mcf	Eligible for 100 Percent Credit
January 2024	$1.56/Mcf	Eligible for 100 Percent Credit

Additional Resources

Tax Credit for Qualifying Low-Producing Oil Leases