ComboCurve: Production Taxes

1.  Key
   
1. Choose Oil, Gas, NGL, or Drip Cond to model a Severance Tax
   
2. Choose Ad Valorem to model an Ad Valorem Tax 
   
2. Category
   
1. Set to automatically to Severance Tax if a phase is selected in the Key column
   
2. If Key is set to Ad Valorem Tax, Category will automatically set to Ad Valorem Tax. Pennsylvania Impact fees, can be selected from the dropdown
   
3. Criteria
   
1. Flat: From As Of Date to Econ Limit
   
2. FPD : Begins at the First Production Date
   
3. As Of : Begins at the As Of Date applied to the well in the Dates section
   
4. Disc Date: Begins at the Discount Date applied to the well in the Dates section
   
5. Maj Seg : Begins when main phase of the well starts production
   
6. End Hist : Begins when the well switches from actual historical data to forecasted data
   
7. Dates : Begins on a scheduled date
   
8. Oil, Gas or Water Rate: Begins when production crosses the threshold set for that one product.
   
4. Period
   
1. If Flat Criteria is selected
   
1. Period will be Flat
   
2. If FPD, As of, Disc Date, Maj Seg, End Hist Criteria are selected
   
1. Period represents the number of months from the relative date selected in Criteria
   
3. If Dates Criteria is selected:
   
1. Period is the hardcoded date
   
4.  If Oil, Gas Water Rate Criteria are selected
   
1. Period is the rate
   
1. MBBL/d for oil and water
   
2. MCF/d for gas
   
5. Value 
   
1. The actual tax value applied
   
6. Unit 
   
1. The unit of the production tax value
   
2. The options are:
   
1. % of Rev
   
2. $/BBL
   
3. $/MCF
4. $/Month
   
7. Description
   
1. Optional text value to describe the Production Tax row
   
8. Shrinkage Condition
   
1. Determines whether the phase dependent severance tax is applied on shrunk or unshrunk volumes 
   
2. Only applicable when unit is set to $/BBL or $/MCF
   
9. Escalation
   
1. Ability to apply an Escalation model to the production tax referenced 
   
10. Calculation
    
1. Determines the ownership value applied to the production tax resulting cost
   
2. The options are: 
   
1. WI: (uncommon) The lessor (landowner) share is paid by the lessee
2. NRI: (All parties receiving production pay their own share)
3. Lease NRI
   
4. 1 - WI
   
5. 1 - NRI
   
6. 1 - Lease NRI
   
7. WI - 1
   
8. NRI - 1
   
9. Lease NRI - 1
   
10. 100% WI
    
11. Deduct Severance Tax
    
1. Allows Severance Tax deductions from Ad Valorem Tax calculation
   
2. Only applicable when Key is set to Ad Valorem Tax
   
12. Rate Type
    
1. Determines the type of rate used when selecting Oil, Gas or Water Rate Criteria 
   
2. The options are
   
1. Gross Well Head 
   
2. Gross Sales
   
3. Net Sales
   
3. Only Applicable when Criteria is set to Oil, Gas, or Water Rate
   
13. Rate Rows Calculation Method
    
1. Determines how variable production is treated with former not allowing rate changes on subsequent threshold crossings.  For instances when production forecasts have production that variably increases and decreases over time
   
1. Monotonic: If production were to increase, no changes will be made to the value
   
2. Non-Monotonic: The values look back up the schedule and vary up or down depending on the production rate.
   
2. Only Applicable when Criteria is set to Oil, Gas, or Water Rate
   

State Pre-Built Models

PA Impact Fee Modeling

Pennsylvania Impact Fee can be selected directly in the Production Taxes model. PA Impact Fee are available both in the simple and advanced setup. 

1. For PA IF Simple, the user can directly select the configuration from our pre-built state model list
   
1. Note: The Simple model utilizes the $2.26 - $2.29 gas price range from the 2021 PUC schedule
   

1. For PA IF Advanced
   
1. The user can add a new row, change the Key to "Ad Valorem Tax" and select from the Category dropdown :
   

1. The available options are:
   
1. PA IF H 2021: For horizontal wells year 2021
   
2. PA IF H 2022-2024: For horizontal wells between year 2022 and 2024
   
3. PA IF V 2021: For vertical wells year 2021
   
4. PA IF V 2022-2024: For horizontal wells year 2022 and 2024
   
2. Upon making your selection, the PUC (Public Utility Committee) schedule will appear on the screen
   
3. A few notes regarding PA Impact Fee:
   
1.  PA IF is imposed as $/year payment beginning the spud year of horizontal wells for the first 15-years.  Vertical wells are 20% of the horizontal fee for the first 10-years.  The schedule can be adjusted  annually by the PUC according to CPI and depends on the average gas price for the preceding calendar year. For modeling simplicity, monthly gas prices from the pricing inputs (no differentials) are used to determine the fee column.  If populated from the header or schedule, spud date is used to determine the years of service for the fee schedule but FPD can also be selected where appropriate.  For further reading, see: https://www.act13-reporting.puc.pa.gov/Modules/Disbursements/FeeSchedule.aspx 
   
2. Deduct Severance Tax, Shrinkage Condition and Calculation are irrelevant for PA IF.  By statute, the leaseholder pays the landowner's portion (WI).
   
3. Start Date (Note that a default hierarchy is followed: if the user selects "from headers" and it does not exist (null), CC will then use FPD as a backup.
   
1. SPUD Date from headers - The Spud Date from the headers for this well will be used.
2. SPUD Date from schedule - The Spud Date from the schedule module if that schedule is selected for this well in the Scenario.  WARNING!  CC schedules populate Spud ONLY when a spudder rig is used so it will be null otherwise. 
3. FPD - First production Date from the hierarchy in the "Dates" tab.
   
4. The user can also select a corresponding escalation to apply to the schedule if applicable.

In this video, we look at the process of modeling the Pennsylvania impact fee in the production taxes economic assumption. We also discuss the differences in modeling the impact fee for horizontal and vertical wells.