Information Release

XT 2010-01 - Oil and Gas Regulatory Cost Recovery Assessment — Issued September 2010

Beginning July 1, 2010, an oil and gas regulatory cost recovery assessment is imposed on a well owner (Ohio Revised Code 1509.50(A)).  An owner must pay the assessment in the same manner as a severer who is required to file a return under the severance tax law. However, an owner may designate a severer who must pay the owner’s assessment on behalf of the owner on the return that the severer is required to file under the severance tax law.  If a severer so pays an owner’s assessment, the severer may recoup from the owner the amount of the assessment.  Except in the case of a well that becomes an exempt domestic well on or after July, 1, 2010, the assessment imposed is in addition to the taxes levied on the severance of oil and gas under the severance tax law (R.C. 1509.50(A)).  Wells designated as domestic exempt prior to July 1, 2010, are not subject to the assessment.

An owner or severer that is liable for the amounts due from the oil and gas regulatory cost recovery assessment uses the same return for the assessment that is prescribed by the Tax Commissioner under the severance tax law for the return of severance taxes.  Form SV 3A - “Oil and Natural Gas Regulatory Cost Recovery Schedule” is used to compute the assessment that is carried to line 14 of Form SV 3 – “Ohio Severance Tax Return.”

The oil and gas regulatory cost recovery assessment is calculated on a quarterly basis, except in the case of an exempt domestic well (see below).  The following information is required to complete Form SV 3A and determine the amount of the oil and gas well assessment:

  • The amount of oil and natural gas severance taxes paid from Form SV 3, lines 7 and 8, Column 4.
  • The amount of oil and natural gas production from Form SV 3, lines 7 and 8, Column 2.  The assessment based on production is based on rates of $0.10/barrel of oil and $0.005/mcf of natural gas.
  • The total number of wells owned or being reported by the severer on behalf an owner. The minimum assessment amount is $15.00/well.

The amount of severance taxes are added to the assessment based on production.  The resulting sum is compared to the minimum assessment amount.  The severance taxes are subtracted from the greater of the two amounts to arrive at the assessment amount due.  The assessment amount due is carried to Form SV 3, line 14.

         

The oil and gas regulatory cost recovery assessment for a well that becomes an exempt domestic well on and after July 1, 2010, is $60 to be paid to the Division of Mineral Resources Management on July 1 each year (R.C. 1509.50(B)(2)). 

Finally, changes were made in applicable tax laws to provide for the collection of the assessment (R.C. 5703.052, 5703.21, 5749.01, 5749.03, 5749.06, 5749.07, 5749.08, 5749.10, 5749.12, 5749.13, 5749.14, 5479.15, and 5749.17).

Revised Forms SV 3 and SV 3A will be available on the department’s Web site within the next week or so.

Please visit the Ohio Department of Natural Resources, using the link provided below, to obtain additional information on Substitute Senate Bill 165, the first major revision to Ohio oil and gas law in 25 years.  Many significant changes have or will be implemented as a result of passage of this new legislation which became effective on June 30, 2010:

          http://www.ohiodnr.com/oil/SB165updates/tabid/22848/Default.aspx

Should you have any questions regarding these changes, please contact us.

                                                        Ohio Department of Taxation

                Excise Tax Section

                                                        P.O. Box 530

                                                        Columbus, Ohio 43216-0530

                                                        Telephone:  (614) 466-7371

                                                        Fax:  (614) 752-2496

                                                        Web site:  tax.ohio.gov