Oil & Gas Severance Tax | Stripper Well Exemption
Colorado law exempts stripper wells from severance tax. A well is considered a stripper well in the following circumstances:
- Oil produced from any individual well that produces 15 barrels per day or less of oil for the average of all producing days during a taxable year.
- Gas produced from any well that produces 90,000 cubic feet or less of gas per day for the average of all producing days during a taxable year.
The withholding agent is not required to provide an annual withholding statement Oil and Gas Withholding Statement (DR 0021W) to the interest owners if all gross payments or ad valorem taxes to be reported are from stripper well production.
If at the end of the year, however, it is determined that a presumed stripper well does not qualify as such, the agent must provide interest owners with an annual withholding statement (DR 0021W) even if no severance tax was withheld. All disbursers must maintain records of barrels of oil and cubic feet of gas produced and of disbursements based on production from any qualifying stripper well, and provide that information to the interest owners.