Oil and gas law in the State of Texas operates under the rule of capture as the fundamental law governing the rights of landowners owning petroleum in a common reservoir. It is settled law that landowners absolutely own all of the oil and gas in place under their land.
Farmout, Joint Venture, Working Interest Provides
Intangible Drilling Costs (IDC): The cost of drilling a well can usually be deducted immediately. The cost of labor, drilling rig time, drilling fluids, fracking services, etc. are intangible expenses deducted against the tax bill. Intangible drilling cost represent 60 to 80% of the total cost of the well. intangible Drilling costs is generally taken as a deduction in the tax year in which the intangible costs occurred.