Form Rpd-41163 - Enhanced Oil Recovery Application And Reporting Instructions Page 2
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2ENHANCED OIL RECOVERY
APPLICATION AND REPORTING INSTRUCTIONS
(Sections 7-29A-1 through 7-29A-5 NMSA 1978)
The Enhanced Oil Recovery Act provides for a reduced oil and gas severance tax rate on crude oil that is severed
and sold from an enhanced recovery project or the expansion of an existing project. The reduced severance tax
rate is one and seven-eighths percent (1.875%) of the taxable value determined under Section 7-29-4.1 NMSA
1978, provided that the annual average price of west Texas intermediate crude oil, determined by the department
by averaging the posted prices in effect on the last day of each month of the twelve-month period ending on May
31 prior to the fiscal year in which the tax rate is to be imposed, was less than twenty-eight dollars ($28.00) per barrel.
In order to qualify for the reduced tax rate, the project or expansion must be approved by the Oil Conservation
Division of the Energy, Minerals and Natural Resources Department (OCD) prior to beginning operation of the
project. Only those projects that were approved after the effective date of this act are eligible for the reduced rate.
The reduced tax rate applies to the crude oil produced from a project beginning the first day of the month after OCD
certifies that a positive production response has occurred. Application for certification of positive production
response must be filed within five years from the date of approval of a secondary recovery project and within seven
years from the date of approval of a tertiary recovery project. If active operation of the project is terminated, the
operator must notify both OCD and TRD within thirty days. The project must be in compliance with rules and
regulations adopted by OCD concerning enhanced oil recovery projects.
1. Who may use the reduced severance tax rate: The tax filer who is responsible for paying the production
taxes on oil, and on other liquid hydrocarbons removed at or near the wellhead, produced from the area certified
to be affected by the enhanced recovery project or expansion.
2. Who must file the application: Any tax filer that is applying the reduced severance tax rate. If the special tax
rate code for enhanced oil recovery is used without receiving prior approval, the tax filer may be assessed the
additional severance tax at the regular rate.
3. How and where to file the application: Complete this form and send it, along with a copy of OCD’s
Certification of a Positive Production Response, to the Taxation and Revenue Department, P. O. Box 2308, Santa
Fe, NM 87504-2308. A separate application must be filed for each qualifying enhanced oil recovery project.
4. When to apply for the enhanced oil recovery special tax rate: When OCD certifies that a positive production
response has occurred. After validating the production unit numbers and wells on your application, the Department
will mail a certification of approval to use the enhanced oil recovery tax rate and will provide the special tax rate code
to be used when reporting. Please do not use the reduced rate before you receive approval.
5. How to report the reduced tax rate: Enter the applicable code in the special tax rate code column and
calculate the tax due amount using the reduced tax rate (the appropriate school, conservation, ad valorem
production tax rates plus the reduced severance tax rate times net taxable value). Complete the other columns per
Form RPD-41135, Oil & Gas Taxes Detail Report Instructions. The recovered oil tax rate is effective beginning the
first day of the month following the date that OCD certifies that a positive production response has occurred and
may be applied only to the crude oil produced from wells within the project area. If you are remitting taxes on a
production unit number that has some wells that
qualify and some wells that do not qualify, you
must report two separate line entries; one line
Mail or deliver the completed form to:
with the special tax rate code, one line without.
New Mexico Taxation and Revenue Department
6. Claim for refund: If the reduced severance
Oil and Gas Bureau
tax rate was not applied when reporting produc-
1200 South St. Francis Drive
tion taxes for an eligible well after the effective
P. O. Box 2308
date, the taxpayer may file a claim for refund by
Santa Fe, NM 87504-2308
submitting amended returns in accordance with
Telephone: (505) 827-0805
Section 7-1-26 NMSA 1978.
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