Form 10-173 - Amended Natural Gas Tax - Producer Lease Detail Supplement - 2008 Page 2

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Form 10-173 (Back)(Rev.2-08/2)

INSTRUCTIONS FOR COMPLETING

TEXAS AMENDED REPORT OF NATURAL GAS TAX PRODUCER LEASE DETAIL SUPPLEMENT

You have certain rights under Chapters 552 and 559, Government Code, to review, request, and correct information

we have on file about you. Contact us at the address or toll-free number listed on your report.

GENERAL INFORMATION

The reverse/rebook concept should be used when amending previously reported data. When amending previously reported data, enter:

• lease information in Items 1 through 13 or use the locator number.

• volumes and values as negative figures to delete data previously reported in Item 14 through 22, except Items 16 and 21. Enter a dash in the beginning of a number to denote

a negative sign.

• new lease information in Items 1 through 13 including “exemption type in Item 9 and “API number” (in Item 10, if applicable) with the correct volumes and values.

LOCATOR NUMBER — Once a report has processed, a locator number is assigned by the Comptroller’s office for each lease transaction. The purpose of the locator number

is to identify the lease that needs to be corrected. Using the locator is optional and will eliminate the need to re-enter unchanged lease data. When using a locator number, only

enter data that needs to be corrected. The locator number can be used to replace Items 3 through 13 and/or adjust Items 14 through 24, except Item 23. More information on

using locator numbers is available on the Comptroller’s Web site.

SPECIFIC INSTRUCTIONS

All gas volumes are reported in “MCF.” For information on converting MCF to MMBTU or converting MMBTU to MCF, see the Natural Gas Tax Guide at the Comptroller’s Web

site

ITEMS 1, 5, 7 and 8

• Enter the lease identification number assigned by the Texas Railroad Commission (RRC) in Item 7. For a gas lease, enter the six-digit lease number. For an oil

lease, add a leading zero (0) to the five-digit lease number and enter as a six-digit number. If the RRC has not assigned a lease number, then enter the 6-digit

drilling permit number in Item 7.

• Items 7 and 8: Do not leave blank.

• If reporting a plant, then enter R3 and the last four digits of the plant identification number assigned by the RRC in Item 7.

ITEM 3.

COMMODITY: Enter the 2-digit alpha code for the type of commodity reported on the lease identified in Item 1 and Item 7.

• Raw Gas (RG) - Sale or purchase of raw gas, unprocessed gas from an oil well, or gas well gas.

• Lease Use (LU) -All gas produced and used to run equipment on the lease regardless of whether it is for oil well, gas well gas, or residue gas. The lease use item

will also include miscellaneous sales of gas to persons not normally engaged in purchasing gas for resale.

• Condensate (CN) -The taxable disposition and purchase of all condensate from a gas well, actual or theoretical. Condensate is the liquid hydrocarbon (a high

gravity oil) that is or can be, removed from gas by a separator. It does not include absorption and separated by a fractionating process. Condensate volume should

be rounded to the nearest barrel.

• Residue (RS) - Residue gas sold or purchased only when there is a distinct sale or purchase of residue gas. Example: If a processing plant takes title to both the

products and the residue commodities, do not report the products and residue commodities as separate items. Use the raw gas designation and the plant operator

should be indicated as the purchaser.

• Products (PR) -Report only when the purchasers of products and residue commodities are different parties. The volume associated with the product commodity

will be the raw gas volume delivered to the gas processing plant (plant inlet volume).

ITEM 4.

COMMODITY CODE: Enter the numeric code for the type of commodity reported on the lease identified in Item 1 and Item 7. The numeric codes are: 1 - Raw Gas,

3 - Lease use, 4 - Condensate, 5 - Residue, 6 - Products.

ITEM 6.

COUNTY CODE: Enter the 3-digit county code for the county of production indicated in Item 2. A list of county codes is available in the Comptroller’s Web site at

CHECK DIGIT: Enter the check digit. For information on the calculation of the check digit, see the Natural Gas Tax Guide on the Comptroller’s Web site at

ITEM 9.

EXEMPTION TYPE: Enter the Comptroller approved numeric code for the legislative exemption type, if applicable.

CODE

DESCRIPTION OF APPROVED EXEMPTION TYPE

CODE

DESCRIPTION OF APPROVED EXEMPTION TYPE

Two-year inactive well, effective Sept. 1, 1997

Three-year inactive well, effective Sept. 1, 1991

Flared/released casinghead gas well, effective Sept. 1, 1997

Incremental production casinghead gas lease, effective Sept. 1, 1997

High cost gas lease with reduced tax rate effective, Sept. 1, 1996

Qualifying low-producing gas well, effective Sept. 1, 2005

Three-year inactive well, effective Sept. 1, 1991

Reactivated orphaned well, effective Jan. 1, 2006

ITEM 10. API NUMBER: Enter the last 8 digits of the America Petroleum Institute (API) number assigned by the Texas Railroad Commission to each well that qualifies for a

well-level exemption. The API number is only required for the two-year inactive lease exemption (Type 3), three-year inactive well exemption (Type 7), and

reactivated orphaned well exemption (Type 12).

ITEM 11. OFF LEASE SALE?: Gas is considered an “off lease” sale when delivery of the gas to the purchaser is made away from the lease. If the producer arranges for

delivery of gas, then the purchaser records the volume received at the point of delivery. If an “off lease” sale is indicated in Item 11 as “yes”, then the tax liability must

be reported as “yes” in Item 18, the purchaser taxpayer number must be left blank in Item 13, and the next taxable value must be reported in Item 22 and Item 25, if

applicable.

ITEMS 12 and 13: Enter the name of your producer in Item 12 and their 11-digit Texas taxpayer number in Item 13.

ITEM 14. TOTAL LEASE VOLUME: Enter 100% or the volume produced for the lease reported in Item 7 for each commodity type. This volume should match the volume

reported to the RRC. If you are a non-operator for this lease, report zero volume in Item 14.

ITEM 15. TAX REIMBURSEMENT: Mark the block indicating whether tax reimbursement is included in calculating the value in Item 15, as outlined in your contract. For

information on tax reimbursement, see Tax Rule 3.18, on the Comptroller’s Web site.

ITEM 16. YOUR VOLUME: Producer/Operator - Enter the volume of gas or condensate sold, as noted on your contract. Non-Operator/Producer taking their production in-kind

must enter your share of the volume of gas or condensate sold, as noted on your contract.

ITEM 17. VALUE OF YOUR VOLUME: Enter the entire value associated with the volume indicated in Item 16. This is usually referred to as the “contract price.” Do not include

tax reimbursement, if applicable.

ITEM 18: ARE YOU LIABLE FOR TAX?: You must mark “YES” or “NO” for all lease types, even if you do not owe tax. Tax liability must be reported as “YES” by at least one

party as stated in the contract between the operator and the purchaser, even if the lease qualifies for 100% exemption and taxes are not due because of the

legislative exemption status.

ITEM 19. GOVERNMENTAL ROYALTY VOLUME: Enter the volume of gas not subject to tax because of a governmental exempt status, such as a city, town or village

government in Texas, a county government in Texas, an independent school district or common school district in Texas, public (state owned) colleges and universities

in Texas, or political subdivisions of the Federal government.

ITEM 20. GOVERNMENTAL ROYALTY VALUE: Enter the value of gas reported in Item 19. Do not enter volumes associated with lease types approved for a legislative tax

exemption.

ITEM 21. MARKETING COST: Enter actual marketing cost incurred. The “market value at the mouth of the well” shall be determined by ascertaining the producer’s actual

marketing costs and subtracting these costs from the producer’s gross cash receipts from the sale of the gas. For more information on allowable marketing costs, see

the Comptroller’s Web site.

ITEM 22. NET TAXABLE VALUE: Enter the calculation of Item 17, less Items 20 and 21. If Items 20 and 21 exceed Item 17, enter the net taxable value as zero in Item 22. If

reporting the following exemption types, then enter net taxable values indicated below:

EXEMPT TYPE

ENTER NET TAXABLE VALUE AS:

03, 04, 07, or 12

zero

the sum of Item 17 less Items 20 and 21 and proceed to Items 23 and 24

50% of the sum of Item 17 less Items 20 and 21

25% of the sum of Item 17 less Items 20 and 21 if the Comptroller certified price of gas ranges from $3.01 to $3.50 per MCF

50% of the sum of Item 17 less Items 20 and 21 if the Comptroller certified price of gas ranges from $2.51 to $3.00 per MCF

Zero if the Comptroller certified price of gas is less than or equal to $2.50 per MCF

ITEM 23. REDUCED TAX RATE FOR TYPE 05: Enter the 3 three-digit reduced tax rate for the approved exemption “Type 5” lease indicated in Item 7.

ITEM 24. TAX DUE ON TYPE 05: Enter the tax due amount for the approved exemption “Type 5” lease reported by multiplying Item 22 times the tax rate indicated in Item 23.