I receive mineral royalties on some wells in Howard County and I’m trying to make sense of my statement each month. How is owner tax figured out? Since the addition of 3 new wells in production, and over the last 3 months my checks have been about the same amount and the owner tax was roughly the same give or take. This month the amount of the royalty was what I’ve been averaging but the “owners tax” was over 3 times the amount? How is the tax calculated? Should I reach out to the company/operator for an explanation? Thank you.
The tax deducted on your royalty check is for oil and gas severance taxes. Rate is 4.6% of oil sales and 7.5% of gas sales. Wells which are classified as gas wells by RRC may qualify for reduced gas severance tax rate. There is also a small fee for oil field clean-up which is assessed at differing rates times barrels and mcf produced each month. In the spring you will receive a property tax appraisal from Howard County Appraisal District. Once the tax value is set, then you will get a property tax statement in the fall which must be paid by January 31, 2024 to avoid interest and penalties.
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Thank you, I’ve gotten an appraisal in the past and have paid the tax bill when it comes. I was just wondering about the huge discrepancy in the amount deducted in the last few months versus this month. Thank you for your input.
I see your question. First, look at the production months under each well to see if the severance tax charge is an adjustment of prior months. Second, look at the details for the charges, rather than the bottom line summary. Many operators combine the total severance charges and other deductions into a single number on the summary line. See if the detail lists Sev Tax, Gathering, Transportation, Other Costs, Post-production costs, or some other words on separate lines under each well. Third, review prices for gas and liquids. Many of these contractual deducts are based on a per mcf cost. So if the price of gas falls and the gross gas income falls, the costs will remain the same and so be a bigger percentage of the total sales. Some months the effect is to be zero for net gas revenues after cost deductions. If you identify the payor, someone else receiving checks from that company can look at lines on their checks to see if they have the same situation and what might be happening.
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