The Permit and Reservoir Section is responsible for processing of the following:

Application for Permit to Drill

• Financial Security Rules
• Financial Security Forms:
  • Performance Bond (1 Well)
  • Performance Bond (Multiple Wells)
  • Irrevocable Letter of Credit (1 Well)
  • Irrevocable Letter of Credit (Multiple Wells)
  • Pledge of Certificate of Deposit (1 Well)
  • Pledge of Certificate of Deposit (Multiple Wells)

Application for Amended Permit to Drill
Application for Substitute Unit Wells
Application to Commingle Oil & Gas production
Applications for 29-B and 29-E exceptions
Applications for Multiple Completion of Oil & Gas Wells
Applications for Severance Tax Relief
Applications concerning Alternate Unit Wells, Reservoir     Reclassification and Downhole Combination

The Section is also responsible for the storage, filing and dissemination of well records, transcripts of hearings, well test information, and historical production information.

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The Severance Tax Relief Program (STRP) was created by Act 2 of the 1994 Regular Session and later amended by Act 16 of the 1996 Regular Session and Act 7 of the 1998 Regular Session. These Acts allow the suspension of all severance taxes due on all production from a qualifying well for a time period which varies depending on the category applied for.

The Office of Conservation certifies qualification under this program in three (3) categories: Deep Well, Horizontal Well, and New Discovery Well.
** Note: The fourth category, Inactive Well, expired June 30, 2000.

DEEP WELL REQUIREMENTS

Well must be drilled to a true vertical depth (TVD) of 15,000 feet or greater.

First production must commence after July 31, 1994.

Form STRP-DW.

Note: Wells sidetracked below 15,000 feet TVD from which production commenced after July 31, 1994 in the sidetrack hole are also eligible, however, only those costs associated with the sidetrack are allowed in the well cost figure.

**Eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

HORIZONTAL WELL REQUIREMENTS

Well must be horizontally drilled or recompleted with 80° deviation from the vertical and at least a 50 foot penetration into the sand.

First production must commence after July 31, 1994.

Form STRP-HW.

Note: Horizontal recompletions are defined as horizontal drilling in an existing well bore. Horizontal recompletion costs are limited to only those costs associated with the horizontal portion of the well bore. Extensions of existing horizontal well bores, in the same sand, are not considered horizontal recompletions.

**Eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

NEW DISCOVERY REQUIREMENTS

Well must be spudded after September 30, 1994.

Well must be completed between September 30, 1994 and September 30, 2000.

Well must be completed in a new reservoir, i.e., a reservoir that was not produced before September 30, 1994 and not penetrated by a well capable of producing hydrocarbons in commercial quantities from such reservoir before said date.

Form STRP-ND.

Note: A well drilled and completed in a new reservoir and located in a new field requires a “New Field” designation from the Geological Division of the Office of Conservation. A developmental well drilled and completed in a new reservoir, but located in an old field requires a hearing. Only the discovery well in each new reservoir qualifies for the tax exemption, any developmental wells in the same reservoir do not qualify.

**Eligible for a two year exemption from the date of first production or until payout of qualified costs, whichever comes first.

WELL COST STATEMENT

A well cost statement must accompany every STRP (Act 2) application for Deep Well, Horizontal Well, and New Discovery Well categories. This cost statement must be a detailed itemized listing of the actual costs to drill, complete, and equip the well for production. No AFE or estimated costs are allowed. Applicants are encouraged to hold the filing of applications until they have a firm cost figure. Applicants are allowed to collect, retroactively, any severance taxes paid back to the date of first production on an approved well.

Costs such as building a board road, preparing the location, logging, cement, drill bits, pipe, labor, 3-D seismic*, etc. can be included on the cost statement. The cost to build a flowline to a facility and any new equipment needed to hook the well up to the facility can also be included. Lease-related costs, legal fees, hearing costs, saltwater disposal wells, title searches, etc. are examples of costs that are not allowed on the cost statement.

Cost statements should be organized and easy to read. Each line item must be identified by actual service or material, not just vendor/provider. Line items will be examined by the Engineering Division to ensure that costs are comparable to offset cost data. Further data may be required to qualify costs. It is preferable for expenditures for the same service or material to be grouped together in one line item rather than listed by vendor/provider each time such service or material is charged. Any accounting or in-house codes should be defined.

*Certain 3-D seismic costs are qualified for inclusion in the cost statement. Qualification of costs depends on the size and technical details of each individual seismic program. Applications claiming 3-D seismic costs must include Form STRP 3-D.

Any questions regarding Act 2 should be directed to:

Jim Yates, P.E.
Office of Conservation
Engineering Division
225.342.5570