As with all leases approved for high cost gas, leases the Texas Railroad Commission determines to be part of a stacked lateral well must be approved on the basis of the drilling and completion costs associated with drilling the specific well tied to each lease number. In this manner, natural gas produced from any stacked lateral well should be allocated to the appropriate lease number on the operator and/or purchaser's tax reports.
If producers find it is impractical for natural gas to be allocated to the specific wells from which the gas was produced, the producer or purchaser should report his or her production under the "parent" lease number and pay the tax based on the applicable tax rate for this lease number. All values reported against this number will count against the accumulated savings statutory limitation of 50 percent of drilling and completion costs for this specific lease, regardless of where the gas was actually produced.
All subsequent wells that are completed and approved for high cost gas will benefit from the costs used to drill and complete the new well only. If a new application is not received for this well, the lease will not be approved for high cost gas.