Internal Revenue Service Opinion SHALLOW OIL LEASE AVAILABLE. 313.4 Acres, Navarro County, Texas.
Stripper oil well

Orphan wells are stripper wells.
Either started out as one or came to be.

What is a Stripper Well?
Here is what the Internal Revenue says.
The Code defines the term "marginal production" for this purpose as domestic crude oil or domestic natural gas which is produced during any taxable year from a property which (1) is a stripper well property for the calendar year in which the taxable year begins, or (2) is a property substantially all of the production from which during such calendar year is heavy oil (i.e., oil that has a weighted average gravity of 20 degrees API or less corrected to 60 degrees Fahrenheit) (sec. 613A(c)(6)(D)). A stripper well property is any oil or gas property which produces a daily average of 15 or less equivalent barrels of oil and gas per producing oil or gas well on such property in the calendar year during which the taxpayer's taxable year begins (sec. 613A(c)(6)(E)).(9)

Two-Year Inactive well: per TRRC rules.   If an oil or gas well has no more than one month of production during the two years preceding the date of application, crude oil, casinghead gas, and well gas produced may be eligible for up to ten year's severance tax exemption.  Beginning Fall 1997 and monthly thereafter, operators are being notified by the Commission when such wells are designated as candidates for certification.  The operator of a designated well makes application for certification between September 1, 1997, and August 31, 2009, by filing the ST-1.  Because the ten-year exemption period begins with the date of certification, maximum payout occurs when the application is made after a designated well is brought back into production.  If operator records indicate that a well might be eligible even if it has not been designated by the Commission, such as re-entry of a plugged well, application is encouraged

Please Note!
The information on this page was taken from the respective web sites. Codes and rules change.
To make sure that this information is current. You will be wise to contact a professional for the facts at the time of your  planning.  Below is a  Professional CPA that we know by reputation to be knowledgeable of the oil business.       

Kelley Wooldridge, CPA

508-A Hwy 110 N. Whitehouse, Tx 75791
Tel (903) 839-3989 Fax (903) 839-3319
E-mail Kelly.wooldridge@cox-internet.com
The web site of Kelly Wooldridge,CPA
 The Internal Revenue web site is www.irs.gov

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