Okla. Stat. tit. 68, § 68-1001

royalty interests - Exemptions.

A. There is hereby levied upon the production of asphalt, ores

bearing lead, zinc, jack and copper a tax equal to three-fourths of

one percent (3/4 of 1%) on the gross value thereof.

B. On or after the effective date of this act and except as

provided by paragraph 4 of this subsection, there shall be levied a

tax on the gross value of the production of oil and gas as follows:

1. Upon the production of oil a tax equal to seven percent (7%)

of the gross value of the production of oil based on a per barrel

measurement of forty-two (42) U.S. gallons of two hundred thirty-one

(231) cubic inches per gallon, computed at a temperature of sixty

(60) degrees Fahrenheit;

2. Upon the production of gas a tax equal to seven percent (7%)

of the gross value of the production of gas;

3. Notwithstanding the levies in paragraphs 1 and 2 of this

subsection, the production of oil, gas, or oil and gas from wells

spudded prior to the effective date of this act, and on or after the

effective date of this act, shall be taxed at a rate of five percent

(5%) commencing with the month of first production for a period of

thirty-six (36) months. Thereafter, the production shall be taxed

as provided in paragraphs 1 and 2 of this subsection; and

4. If the provisions of Article XIII-C of the Oklahoma

Constitution are approved by the people pursuant to adoption of

State Question No. 795, the rate of gross production tax imposed by

paragraph 3 of this subsection shall be reduced to two percent (2%)

for the first thirty-six (36) months of production and thereafter

the rate of taxation shall be seven percent (7%).

C. The taxes hereby levied shall also attach to, and are levied

on, what is known as the royalty interest, and the amount of such

tax shall be a lien on such interest.

D. 1. Except as otherwise provided in this section, for

secondary and tertiary recovery projects approved or having an

initial project start date on or after July 1, 2022, all production

which results from such secondary and tertiary recovery projects

shall be exempt from the gross production tax levied pursuant to

this section for a period not to exceed five (5) years from the

initial project start date or for a period ending upon the

termination of the secondary and tertiary recovery process,

whichever occurs first.

2. For purposes of this subsection, "project start date" means

the date on which the injection of liquids, gases, or other matter

begins on an enhanced recovery project.

3. For new secondary and tertiary recovery projects approved by

the Oklahoma Corporation Commission on or after July 1, 2022, such

approval shall constitute qualification for an exemption.

Oklahoma Statutes - Title 68. Revenue and Taxation Page 359

4. For all production exempted pursuant to this subsection, a

refund against gross production taxes shall be issued as provided in

subsection F of this section.

5. Except as otherwise provided in this section, any production

which results from a recovery project from a well on the Corporation

Commission's orphaned well list shall receive a fifty-percent

reduction from the gross production tax levied pursuant to paragraph

3 of subsection B of this section from the project beginning date

for a period of thirty-six (36) months, after which the rate shall

increase to the full rate of tax prescribed by paragraph 3 of

subsection B of this section. Furthermore, before any production

from a recovery project under this paragraph occurs the producer

overseeing the project shall file a corporate surety bond, letter of

credit from a banking institution, cash, or a certificate of deposit

with the Secretary of State in the sum of Twenty-five Thousand

Dollars ($25,000.00), per well transferred from the Corporation

Commission's orphaned well list, conditioned upon recovery under

this project for thirty-six (36) months. The Secretary of State
overseeing the project shall file a corporate surety bond, letter of

credit from a banking institution, cash, or a certificate of deposit

with the Secretary of State in the sum of Twenty-five Thousand

Dollars ($25,000.00), per well transferred from the Corporation

Commission's orphaned well list, conditioned upon recovery under

this project for thirty-six (36) months. The Secretary of State

shall hold such corporate surety bond, letter of credit from a

banking institution, cash, or certificate of deposit for the benefit

of the Corporation Commission Plugging Fund if such well is

abandoned by the producer and returns to the Corporation

Commission's orphaned well list.

E. Except as otherwise provided by this section, the production

of oil, gas, or oil and gas from wells drilled but not completed as

of July 1, 2021, which are completed with the use of recycled water

on or after July 1, 2022, shall earn an exemption from the gross

production tax levied from the date of first sales for a period of

twenty-four (24) months. The exemption provided in this subsection

shall be proportional to the percentage of the total amount of water

used to complete the well that is recycled water. For all

production exempted pursuant to this subsection, a refund against

gross production taxes shall be issued as provided in subsection F

of this section. For purposes of this subsection, "recycled water"

means oil and gas produced water and waste that has been

reconditioned or treated by mechanical or chemical processes into a

reusable form.

F. On or after July 1, 2022, for all oil and gas production

exempt from gross production taxes pursuant to subsections D and E

of this section during a given fiscal year, a refund of gross

production taxes shall be issued to the well operator or a designee

in the amount of such exempted gross production taxes paid during

such period, subject to the following provisions:

1. A refund shall not be claimed until after the end of the

fiscal year. As used in this subsection, a fiscal year shall be

deemed to begin on July 1 of one calendar year and shall end on June

30 of the subsequent calendar year;

Oklahoma Statutes - Title 68. Revenue and Taxation Page 360

2. Unless otherwise specified, no claims for refunds pursuant

to the provisions of this subsection shall be filed more than

eighteen (18) months after the first day of the fiscal year in which

the refund is first available;

3. Any person claiming a refund pursuant to the exemption

provided in subsections D and E of this section shall file an

application with the Tax Commission which, upon determination of

qualification by the Corporation Commission, shall approve the

application for such exemption;

4. The Tax Commission may require any person claiming a refund

pursuant to the exemptions provided in subsections D and E of this

section to furnish information or records concerning the exemption

as is deemed necessary by the Tax Commission;

5. No claims for refunds pursuant to the provisions of this

subsection shall be filed by or on behalf of persons other than the

operator or a working interest owner of record at the time of

production;

6. No entity, including subsidiaries of the entity, shall be

authorized to receive refunds claimed pursuant to the exemption

provided in subsection D of this section that exceed twenty percent

(20%) of the limitation provided in paragraph 7 of this subsection;

and

7. The total amount of refunds authorized shall not exceed

Fifteen Million Dollars ($15,000,000.00) pursuant to the exemption

provided in subsection D of this section and Ten Million Dollars

($10,000,000.00) pursuant to the exemption provided in subsection E

of this section for any fiscal year. If the amount of claims for

refunds exceed the limits provided in this paragraph, the Tax

Commission shall determine the percentage of the refund which

establishes the proportionate share of the refund which may be
exemption

provided in subsection D of this section and Ten Million Dollars

($10,000,000.00) pursuant to the exemption provided in subsection E

of this section for any fiscal year. If the amount of claims for

refunds exceed the limits provided in this paragraph, the Tax

Commission shall determine the percentage of the refund which

establishes the proportionate share of the refund which may be

claimed by any taxpayer so that the maximum amounts authorized by

this paragraph are not exceeded.

G. On or after July 1, 2022, all persons shall only be entitled

to either the exemption granted pursuant to subsection D or E of

this section for each oil, gas, or oil and gas well drilled or

recompleted in this state. However, any person who qualifies for

the exemption granted pursuant to subsection E of this section shall

not be prohibited from qualification for the exemption granted

pursuant to subsection D of this section if the exemption granted

pursuant to subsection E of this section has expired.

H. The Tax Commission shall have the power to require any such

person engaged in mining or the production or the purchase of such

asphalt, mineral ores aforesaid, oil, or gas, or the owner of any

royalty interest therein to furnish any additional information by it

deemed to be necessary for the purpose of correctly computing the

amount of the tax; and to examine the books, records and files of

such person; and shall have power to conduct hearings and compel the

Oklahoma Statutes - Title 68. Revenue and Taxation Page 361

attendance of witnesses, and the production of books, records and

papers of any person.

I. Any person or any member of any firm or association, or any

officer, official, agent or employee of any corporation who shall

fail or refuse to testify; or who shall fail or refuse to produce

any books, records or papers which the Tax Commission shall require;

or who shall fail or refuse to furnish any other evidence or

information which the Tax Commission may require; or who shall fail

or refuse to answer any competent questions which may be put to him

or her by the Tax Commission, touching the business, property,

assets or effects of any such person relating to the gross

production tax imposed by this article or exemption authorized

pursuant to this section or other laws, shall be guilty of a

misdemeanor, and, upon conviction thereof, shall be punished by a

fine of not more than Five Hundred Dollars ($500.00), or

imprisonment in the jail of the county where such offense shall have

been committed, for not more than one (1) year, or by both such fine

and imprisonment; and each day of such refusal on the part of such

person shall constitute a separate and distinct offense.

J. The Tax Commission shall have the power and authority to

ascertain and determine whether or not any report herein required to

be filed with it is a true and correct report of the gross products,

and of the value thereof, of such person engaged in the mining or

production or purchase of asphalt and ores bearing minerals

aforesaid and of oil and gas. If any person has made an untrue or

incorrect report of the gross production or value or volume thereof,

or shall have failed or refused to make such report, the Tax

Commission shall, under the rules prescribed by it, ascertain the

correct amount of either, and compute the tax.

K. The payment of the taxes herein levied shall be in full, and

in lieu of all taxes by the state, counties, cities, towns, school

districts and other municipalities upon any property rights attached

to or inherent in the right to the minerals, upon producing leases

for the mining of asphalt and ores bearing lead, zinc, jack or

copper, or for oil, or for gas, upon the mineral rights and

privileges for the minerals aforesaid belonging or appertaining to

land, upon the machinery, appliances and equipment used in and

around any well producing oil, or gas, or any mine producing asphalt
ached

to or inherent in the right to the minerals, upon producing leases

for the mining of asphalt and ores bearing lead, zinc, jack or

copper, or for oil, or for gas, upon the mineral rights and

privileges for the minerals aforesaid belonging or appertaining to

land, upon the machinery, appliances and equipment used in and

around any well producing oil, or gas, or any mine producing asphalt

or any of the mineral ores aforesaid and actually used in the

operation of such well or mine. The payment of gross production tax

shall also be in lieu of all taxes upon the oil, gas, asphalt or

ores bearing minerals hereinbefore mentioned during the tax year in

which the same is produced, and upon any investment in any of the

leases, rights, privileges, minerals or other property described

herein. Any interest in the land, other than that herein

enumerated, and oil in storage, asphalt and ores bearing minerals

hereinbefore named, mined, produced and on hand at the date as of

Oklahoma Statutes - Title 68. Revenue and Taxation Page 362

which property is assessed for general and ad valorem taxation for

any subsequent tax year, shall be assessed and taxed as other

property within the taxing district in which such property is

situated at the time.

L. No equipment, material or property shall be exempt from the

payment of ad valorem tax by reason of the payment of the gross

production tax except such equipment, machinery, tools, material or

property as is actually necessary and being used and in use in the

production of asphalt or of ores bearing lead, zinc, jack or copper

or of oil or gas. Provided, the exemption shall include the

wellbore and non-recoverable down-hole material, including casing,

actually used in the disposal of waste materials produced with such

oil or gas. It is expressly declared that no ice plants, hospitals,

office buildings, garages, residences, gasoline extraction or

absorption plants, water systems, fuel systems, rooming houses and

other buildings, nor any equipment or material used in connection

therewith, shall be exempt from ad valorem tax.