Two boxes: oil well and gas well
Texas law sorts wells by how much gas they make for each barrel of oil, and the line is 100,000 cubic feet. An oil well is any well that produces one barrel or more of oil to each 100,000 cubic feet of gas. A gas well is a well that produces gas not associated or blended with oil at the time of production, or more than 100,000 cubic feet of gas to each barrel of oil from the same producing horizon, or gas from a gas-only formation the well bore passes through while oil is produced through another string of casing NRC §86.002.
Gas per barrel of oil, in cubic feet
Oil well
At least one barrel of oil to each 100,000 cubic feet of gas.
Its gas is casinghead gas, gas native to an oil stratum and produced with the oil.
Gas well
Gas not blended with oil at the time, or more than 100,000 cubic feet of gas to each barrel of oil.
Its gas is gas well gas. Light liquids it makes are condensate.
From Natural Resources Code §86.002 (5), (6) and (10). Gas well gas is not a defined term; it is gas from a gas well. The Commission’s production data reports casinghead gas on oil leases and gas well gas under gas well IDs.
The sorting has consequences. A well that makes a lot of gas is still an oil well, as long as it makes at least a barrel of oil for every 100,000 cubic feet. Your stub does not say which box your lease is in, but the state record does.
The names
The same chapter names the kinds of gas, and the Energy Information Administration and the Tax Code fill in the rest. These are the words you will meet on a stub, a lease and the state record:
| Term | What it means |
|---|---|
| Oil well | A well that produces one barrel or more of oil to each 100,000 cubic feet of gas. §86.002(6) |
| Gas well | A well that produces gas not blended with oil, or more than 100,000 cubic feet of gas per barrel of oil. §86.002(5) |
| Casinghead gas | Gas or vapor native to an oil stratum and produced with oil. Also called oil well gas. §86.002(10) |
| Gas well gas | Gas from a gas well. The statute does not define it as a separate term. §86.002(5) |
| Dry gas | Gas produced from a stratum that does not produce oil. §86.002(7) |
| Sweet gas | All gas except sour gas and casinghead gas. §86.002(9) |
| Sour gas | Gas with more than 1.5 grains of hydrogen sulphide, or more than 30 grains of total sulphur, per 100 cubic feet, or gas the Commission finds unfit for domestic light or fuel. §86.002(8) |
| Condensate | Light liquid hydrocarbons recovered from lease separators or field facilities at natural gas wells. It normally enters the crude oil stream. EIA glossary |
On your stub and the state record
The Railroad Commission’s production database keeps two kinds of record. An oil lease reports the barrels of oil it produced and the Mcf of casinghead gas produced with it. A gas well is reported under a six-digit gas well ID assigned by the Commission RRC production guide. An oil lease number is assigned by the Commission too, and is unique within its district. So the type of the state record tells you which of the two boxes your lease is in.
Your stub follows the same split in its own way. A gas line on a stub from an oil lease is casinghead gas. A gas line from a gas well is gas well gas, and its liquids come as condensate, or as plant products if the gas is processed. If you do not know which record your lease is in, look it up in the Texas lease lookup: a lease that reports barrels of oil is an oil lease, and one reported under a gas ID is a gas well.
Where the gas goes after it is produced is a separate question, and the Commission tracks it by disposition code. The disposition codes guide covers the codes, including the ones that mean gas was flared or used on the lease.
- 1Lease fuelBurned to run the wells and equipment. Not sold, usually no royalty.
- 2Transmission lineSold into a pipeline. Gas price, few or no plant products.
- 3Processing plantSent to a plant that pulls out liquids. Can carry processing fees and plant-product lines.
- 4Flared or ventedBurned off or released. Nothing sold, so nothing on the stub.
- 5–8Gas lift, repressure, otherUsed back on the lease or in a special way. Rare on royalty leases.
Codes as reported by the operator to the Railroad Commission each month. The five groups add up to all the gas the lease reports.
Same tax, different record. Know which one you own in.
What your lease may say
The statute supplies the words. Your lease sets the rate and the deductions. Some leases write one royalty clause for oil, another for casinghead gas and another for gas well gas, with different terms for each. The statute treats them as related products: it defines a division order as an agreement directing payment for oil, gas, casinghead gas or other related hydrocarbons §91.401(3). A division order cannot change which clause of the lease applies.
Read the gas clauses in your lease. If the gas royalty carries the operator’s post-production costs, our guide to post-production deductions explains the common ones and when to ask.
The tax is the same
For the Texas gas production tax, “gas” means natural gas, casinghead gas or other gas taken from the earth, whether it comes from a gas well or a well that also produces oil, distillate or condensate Tax Code §201.001. The rate is 7.5 percent of market value, whichever kind it is. Condensate is taxed apart, at 4.6 percent of market value, the same as oil Comptroller, gas tax.
So the tax column of a gas line should be 7.5 percent of its gross, on an oil lease and on a gas well alike. If it is not, check the severance tax check or ask.
What to check
- Which record is your lease in? Oil lease or gas well decides whether the stub’s gas line is casinghead gas or gas well gas.
- Does the gas volume line up? Multiply the lease’s reported gas by your decimal. The gas royalty calculator handles the conversion to MMBtu.
- Is the tax 7.5 percent of gross? Both kinds of gas share the rate.
- Are the deductions ones your lease allows? Ask for an explanation. You can request it in writing, by certified mail, and the payor has 60 days to answer §91.504(a).
The question to ask
For property [name], owner number [number], please tell me whether my interest is paid as casinghead gas or gas well gas, and which royalty clause of my lease applies to each gas line on the [month, year] statement.