The costs of maintaining and operating property and equipment on a producing oil and gas lease.

The costs incurred to extract the oil and gas from beneath the earth’s surface to a central gathering or shipping point

It includes the cost of operating and maintaining producing leases. It also includes the cost of labor for operating and maintaining the equipment on the lease,repairs and supplies, utilities, automobile and truck expenses, taxes, insurance, and overhead expenses such as bookkeeping, billing costs, and correspondence. Operating expenses of oil and gas leases will include direct and indirect expenses and depreciation. Operating costs on secondary and tertiary recovery projects are somewhat higher because of the added expense of injecting water, gas, etc., into the producing formation. The cost of the specialized equipment needed, such as pumps,tanks,boilers, high pressure wellhead equipment, etc., must be capitalized and recovered through depreciation. The cost of operating the equipment is LOE.