1. (a) General provisions. This Section establishes criteria for determining whether an operator of an economically at-risk oil lease has met the required conditions to apply for an exemption from gross production tax levied on such and establishes a procedure for the issuance of the refund.
2. (b) Application to Oklahoma Tax Commission; determination; approval. Any operator who desires to make application to have a lease certified as being economically at-risk shall submit electronically through the Oklahoma Taxpayer Access Point (OKTAP) the following information at the time of submission:
3. (1) Properly completed Form 329;
4. (2) Division Order(s) supporting the applicable royalty interest payments made during the claim period;
5. (3) An itemization of all expenses claimed as lease operating expenses;
6. (4) For leases governed by a Joint Operating Agreement (JOA) a copy of the JOA, including the accounting procedures attached to the JOA showing the base rate used to escalate per the Council of Petroleum Accountants Societies (COPAS) for the overhead expense;
7. (5) Copies of the daily production reports for the calendar year applied; and
8. (6) A Percent of Proceeds (POP) statement is required to support ratios when MMbtu to MCF is not 1:1.
9. (c) Qualifying lease. A qualifying lease shall include a gas lease and an oil lease but shall not include a brine lease.
10. (d) Net profit/loss calculation. For each calendar year, subtract from the gross revenue of the lease any severance taxes, royalty payments, and lease operating expenses, including expendable workover and recompletion costs for the applicable calendar year, and overhead escalation costs up to the maximum overhead percentage allowed by the Council of Petroleum Accountants Societies (COPAS). Should a JOA for the lease not exist, documentation is required to support the costs used to calculate the overhead deduction claimed and the method used to allocate the amount back to the production unit number. For purposes of this calculation, depreciation, depletion, and intangible drilling costs shall not be included.
11. (e) Tax Commission may require additional information. For audit purposes, the Tax Commission may require additional information, such as copies of the operator's federal income tax return, joint interest billings, or other documentation regarding lease production or expenses.
12. (f) Denial of application. Failure to submit all required information at the time of application may result in a denial of the application.
13. (g) Burden of proof. The burden of establishing the right to, and the validity of, a credit or refund is on the claimant.

Added at 14 Ok Reg 2696, eff 6-26-97

Amended at 23 Ok Reg 2816, eff 6-25-06

Amended at 34 Ok Reg 79, eff 9-30-16 (emergency)

Amended at 34 Ok Reg 2060, eff 9-11-17

Amended at 40 Ok Reg 1260, eff 8-11-23

Amended at 41 Ok Reg, Number 22, effective 11-1-24

Amended at 42 Ok Reg, Number 20, effective 7-15-25