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Tax credits are available for both oil (KRS 137.132) and gas (KRS 143A.033) produced from recovered inactive wells.  The tax credit is equal to 4.5 percent of the gross value of the hydrocarbon (oil or natural gas) produced from the recovered inactive well. 

There are two stipulations that must be met for eligibility for the tax credit:

  1. The well must have been inactive or plugged for two consecutive years prior to returning the well to an active status.
  2. The hydrocarbon is produced from the same pre-existing hydrocarbon bearing strata, i.e., the well is not deepened or recompleted to another hydrocarbon bearing zone.

The Division of Oil and Gas will provide the applicant a letter certifying that the conditions for the tax credit have been met, and that letter can be submitted with other needed documentation to the Severance Tax Section of the Department of Revenue.