How much did Kansas oil and gas conservation fees increase in 2018 and when?

Plain-English summary

Kansas Notice 18-03 announces an increase in the oil and gas conservation fees assessed on production, effective June 15, 2018.

The rate change. The Kansas Corporation Commission amended K.A.R. 82-3-206 and K.A.R. 82-3-307 to raise the conservation assessment:

• Oil: from 91.00 mills per barrel (.091) to 144.00 mills per barrel (.144).
• Gas: from 12.9 mills per 1,000 cubic feet (.0129) to 20.50 mills per 1,000 cubic feet, or 1 mcf (.0205).

Split-rate June reporting. Because the increase starts on June 15, 2018, a June report uses two rates -- the current rate for June 1-14, 2018 and the new rate for June 15-30, 2018 -- totaled into a one-line entry, as is already done on Monthly Oil and Monthly Gas reports. Keep supporting documentation to justify the amounts shown. (For example, the notice works through a 425-barrel oil well split 301.61 barrels at .091 plus 123.39 barrels at .144.)

When it applies and when to pay. The new rate applies to oil and gas production occurring on and after June 15, 2018. The payment due date for June production is on or before August 20, 2018. The procedure for paying the fee has not changed, and producers or purchasers who already remit the fee with the severance tax continue using the same method.

Severance tax unchanged. The severance tax rate has not changed -- only the conservation fee.

What this means for you

Oil and gas producers and purchasers who remit the fee

• Apply the higher conservation-fee rates to production on and after June 15, 2018.
• For June, report June 1-14 volume at the old rate and June 15-30 volume at the new rate, combined into one line, and keep documentation.

June 2018 filers

• Pay the June conservation fee on or before August 20, 2018 using your existing payment method.

Common questions

What are the new rates? 144.00 mills per barrel of oil (.144) and 20.50 mills per mcf of gas (.0205).

When do they take effect? June 15, 2018.

How do I report June production? Split it -- old rate for June 1-14, new rate for June 15-30 -- combined into a one-line entry with supporting records.

Did the severance tax change? No -- only the conservation fee increased.

Citations and references

• K.A.R. 82-3-206 and K.A.R. 82-3-307 -- amended by the Kansas Corporation Commission to increase the oil and gas conservation assessment.
• Oil: .091 to .144 per barrel; Gas: .0129 to .0205 per mcf, effective June 15, 2018.
• June production conservation-fee payment due on or before August 20, 2018; severance tax rate unchanged.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 18-03

Original ruling text

TAX POLICY DEPARTMENT OF REVENUE
109 SW 9th STREET PHONE: 785-368-8222
PO BOX 3506 FAX: 785-296-7928
TOPEKA, KS 66601-3506 www.ksrevenue.org
GOVERNOR JEFF COLYER, M.D.
SAMUEL M. WILLIAMS, SECRETARY

                                        NOTICE 18-03

                      INCREASE IN OIL AND GAS CONSERVATION FEES
                                     (JULY 1, 2018)

The Kansas Corporation Commission recently amended K.A.R. 82-3-206 and K.A.R. 82-3-307
increasing the conservation assessment on both oil and gas production. Prior to the change, the oil
assessment was 91.00 mills per barrel (.091). Effective June 15, 2018 the oil assessment increases
to 144.00 mills per barrel (.144). Prior to the change the gas assessment was 12.9 mills per 1000
cubic feet (.0129). Effective June 15, 2018, the gas assessment increases to 20.50 mills per 1,000
cubic feet or 1 mcf (.0205).

Please note that the beginning date for the fee increase is June 15, 2018. This means a person or
entity filing a report will have two distinct rates to use for reporting purposes for the month of
June, i.e., the current rate for June 1-14, 2018 and the new rate for June 15-30, 2018. If there are
purchases made in both time frames they should be totaled into a one-line entry, as is now being
done on Monthly Oil and Monthly Gas reports. A person or entity filing a report should maintain
supporting documentation to justify the amounts shown.

Example:

Oil well #1 had a total gross volume of 425 barrels. Of that amount 301.61 barrels was for June
1-14, 2018 and 123.39 for June 15-30, 2018. The conservation fee would be equal to 301.61 times
.091 or $27.45, plus 123.39 times .144 or $17.77, totaling $45.22.

Gas well #1 has a total gross volume of 350 mcf. Of that amount 248 mcf's was for June 1-14,
2018 and 102 mcf's for June 15-30, 2018. The conservation fee would be 248 times .0129 or
$3.20, plus 102 times .0205 or $2.10, totaling $5.30.

The new rate will apply to oil and gas production occurring on and after June 15, 2018. The
payment due date for June production is on or before August 20, 2018. The procedure for paying
the fee has not changed. Those producers and/or purchasers who currently remit the fee and the
severance tax will continue using the same payment method. The severance tax rate has not
changed.

If you have any questions regarding calculating or remitting the fee, please contact the Mineral
Tax Section at 785-368-8222. Select the business tax option and then the mineral tax option.

If you have questions regarding the conservation fee increase, please contact the Kansas
Corporation Commission at (316) 337-6200.

                               Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                           Taxpayer Assistance Center
                          Kansas Department of Revenue
                            Topeka, KS 66612-1588
                              Phone: 785-368-8222
                               Fax: 785-296-2703