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Archives - Severance Tax Relief Program

The information contained below relates to the origin of the Severance Tax Relief Program (STRP) and includes qualifications that are no longer active.

The STRP was created by Act 2 of the 1994 Regular Session then amended by Act 16 of the 1996 Regular Session, Act 7 of the 1998 Regular Session, Act 74 of the 2002 Regular Session and was amended and extended by Act 492 of the 2005 Regular Session for inactive wells. New qualifications for inactive and orphan wells were created by Act 421 of the 2017 Regular Session and expired June 30, 2023.

Well Status Determinations have been evaluated by the office policy set forth in the following Office of Conservation Memorandums that address the issue:

The following programs are no longer active and applications are not accepted. However, the qualification criteria is included below for historical reference.


INACTIVE WELL WITH SIMILAR PERFORATIONS REQUIREMENTS**

  • Form STRP-IA
  • >> The well must have thirty days or less production for two consecutive years during the qualifying period.
  • >> Production qualifying for the reduced inactive severance tax rate must be from the same or within 100' of the top or bottom perforations of the last producing interval for lease wells, and from the defined interval of the last producing interval for unit wells.
  • >> Return to production date must be after August 1, 2017.

See the guidance memorandum for information regarding the Inactive Well with similar perforations incentive per Act 421 of the 2017 Legislative Session.

**Eligible for a 50% reduction in severance tax for a period of ten years within the qualified producing interval. The reduced inactive severance tax rate will begin on the date of first production after the qualifying period or 90 days after the application is received in the Office of Conservation, whichever comes first.

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ORPHAN WELL WITH SIMILAR PERFORATIONS REQUIREMENTS**

  • Form STRP-OW
  • >> Well must be designated as an orphaned well continuously for a period of five years or more, ending between August 1, 2017 and June 30, 2023.
  • >> Production qualifying for the reduced orphan severance tax rate must be from the same or within 100' of the top or bottom perforations of the last producing interval for lease wells, and from the defined interval of the last producing interval for unit wells.
  • >> Return to production date must be after August 1, 2017.

See the guidance memorandum for information regarding the Inactive Well with similar perforations incentive per Act 421 of the 2017 Legislative Session.

**Eligible for a 75% reduction in severance tax for a period of ten years within the qualified producing interval. The reduced orphan severance tax rate will begin on the date of first production after the qualifying period or 90 days after the application is received in the Office of Conservation, whichever comes first.

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INACTIVE WELL REQUIREMENTS** (Act No. 492 of the 2005 Regular Session)

  • REQUIREMENTS
    • Form STRP-IW
    • List of day(s) produced. (if applicable)
  • The qualification period for Inactive Well Status:
    • July 1, 2002 to June 30, 2010  
  • NOTES
    • Act 492 applies to certifications granted on or after January 1, 2005.
    • The well must have thirty days or less production for two consecutive years during the qualifying period.  
    • The five-year exemption period shall begin on the first occurrence of the date of first production or ninety days after the application is received in our office, whichever occurs first  
    • A well previously approved for severence tax exemption can qualify again if:
      • A new application for well status determination is approved;
      • It meets the current qualification criteria;
      • The well had produced and the previous incentive period has expired;
      • The well had not been produced and the previous incentive period has not expired.
    • The qualification of a well is determined by focusing on its well bore:
      • If the well has a dual side, triple side, etc. that produced during the two year qualification period, that production will count against the 30 day period.
  • Download Form STRP-IW:

    • **Eligible for a five year exemption from the date of first production or ninety days after receipt date, whichever comes first.

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    NEW DISCOVERY REQUIREMENTS**

    • Form STRP-ND
    • Well must have spud 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.  
  • 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.  
  • The Order recognizing a developmental well as a "New Discovery" must be attached to form STRP-ND. (if applicable)

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

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