The percentage of royalty interest owned by a governmental entity, as defined in Comptroller
Rule 3. 14, is exempt from the production tax and does not fall upon the other owners to make
up the tax. When reporting the governmental entity exemption on the natural gas report you
will report the percentage of value associated with the exempt governmental entity in the
"Exempt Value" reporting block and then subtract that amount from your "Value of Your
Volume" to come up with a "Net Taxable Value" that will be adjusted for the exempt percentage.