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A BILL TO BE ENTITLED
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AN ACT
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relating to a severance tax exemption for oil and gas produced from |
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certain restimulation wells; providing a civil penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 202, Tax Code, is amended |
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by adding Section 202.062 to read as follows: |
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Sec. 202.062. TAX EXEMPTION FOR OIL AND GAS PRODUCED FROM |
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RESTIMULATION WELLS. (a) In this section: |
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(1) "Commission" means the Railroad Commission of |
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Texas. |
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(2) "Consecutive months" means months in consecutive |
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order, regardless of whether an oil or gas well produces |
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hydrocarbons during any or all of those months. |
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(3) "Hydrocarbons" means the oil, gas, condensate, and |
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other hydrocarbons produced from an oil or gas well. |
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(4) "Operator" means the person responsible for the |
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actual physical operation of an oil or gas well. |
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(5) "Qualifying well" means a restimulation well that |
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has been certified by the commission under this section as a |
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qualifying well. |
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(6) "Restimulation costs" means expenses that are |
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directly attributable to payment for the restimulation treatment |
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performed on a restimulation well. |
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(7) "Restimulation treatment" means the treatment of |
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an oil or gas well with an application of fluid under pressure for |
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the purpose of initiating or propagating fractures in a target |
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geologic formation to enhance the production of hydrocarbons from |
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the well. |
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(8) "Restimulation well" means a previously completed |
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oil or gas well that: |
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(A) is classified by the commission as a marginal |
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well, as described by Section 85.122, Natural Resources Code, or a |
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marginal gas well, as defined by Section 86.091, Natural Resources |
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Code; and |
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(B) following production of hydrocarbons, |
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received a restimulation treatment. |
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(b) This section does not apply to an oil or gas well that: |
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(1) has less than 60 months of production reported to |
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the commission before the date a restimulation treatment is |
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performed; |
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(2) is part of an enhanced oil recovery project, as |
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defined by Section 89.002, Natural Resources Code; or |
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(3) is drilled but not completed and that does not have |
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a record of hydrocarbon production reported to the commission. |
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(c) Hydrocarbons produced from a qualifying well are exempt |
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from the taxes imposed by Chapter 201 and this chapter until the |
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earlier of: |
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(1) the last day of the 60th consecutive month |
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following the month in which the well first produces hydrocarbons |
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after a restimulation treatment is completed; or |
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(2) the date on which the cumulative amount of taxes |
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exempted under Chapter 201 and this chapter and any credit under |
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Subsection (l) equals: |
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(A) if the qualifying well is a restimulation |
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well, 50 percent of the restimulation costs described by Subsection |
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(j); or |
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(B) if the qualifying well is a restimulation |
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well on which the restimulation treatment was performed using |
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hydraulic fracturing pumps powered exclusively by electricity or |
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natural gas, 75 percent of the restimulation costs described by |
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Subsection (j). |
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(d) Notwithstanding Section 201.057, gas produced from a |
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qualifying well that was previously certified by the commission as |
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a well that produces or will produce high-cost gas is not eligible |
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for the tax reduction provided by that section during the period the |
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gas is exempt from tax under Subsection (c) of this section. |
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(e) The operator of a restimulation well may apply to the |
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commission for certification that the well is a qualifying well. |
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The application may be made at any time after the first day the well |
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produces hydrocarbons following the date a restimulation treatment |
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is completed. The commission may require an applicant to provide |
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any relevant information required to administer this section. |
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(f) If the commission approves an application submitted |
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under Subsection (e), the commission shall issue a certificate |
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designating the well as a qualifying well and specifying whether |
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the restimulation treatment was performed using hydraulic |
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fracturing pumps powered exclusively by electricity or natural gas. |
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(g) The commission may revoke a certificate issued under |
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Subsection (f) if the commission determines that: |
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(1) a well that was certified as a qualifying well is |
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not a restimulation well; |
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(2) if the certificate specifies that the |
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restimulation treatment was performed on a qualifying well using |
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hydraulic fracturing pumps powered exclusively by electricity or |
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natural gas, the restimulation treatment was performed using a |
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method other than the method specified in the certificate; or |
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(3) the operator is claiming or has claimed an |
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exemption under this section for hydrocarbons produced from a well |
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that is not a qualifying well. |
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(h) The commission shall notify an operator that a |
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certificate issued under Subsection (f) has been revoked. An |
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exemption provided by this section is automatically revoked on the |
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date the commission revokes a certificate unless the commission |
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issues a new certificate for the well. Hydrocarbons produced from |
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the well after the date a certificate is revoked are not eligible |
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for the exemption provided by this section. |
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(i) To qualify for the exemption provided by this section, |
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the person responsible for paying the tax must apply to the |
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comptroller. The comptroller shall determine the form and content |
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of the application, which must include: |
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(1) the certificate issued by the commission under |
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Subsection (f); and |
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(2) a report of the restimulation costs incurred to |
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perform the restimulation treatment on the qualifying well from |
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which the hydrocarbons that are the subject of the application are |
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produced. |
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(j) For the purposes of Subsection (i)(2), restimulation |
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costs include only the current and contemporaneous restimulation |
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costs associated with performing the restimulation treatment. |
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(k) The comptroller shall approve an application for an |
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exemption provided by this section if the application meets the |
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requirements of this section. The comptroller may require the |
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person applying for the exemption to provide any relevant |
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information necessary to administer this section. The comptroller |
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by rule may establish procedures to comply with this section. |
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(l) If the tax imposed under Chapter 201 or this chapter, as |
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applicable, is paid at the applicable rate on hydrocarbons produced |
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from a qualifying well on or after the date the commission issues a |
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certificate for the well under Subsection (f) but before the date |
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the comptroller approves an application for an exemption for |
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hydrocarbons produced from the well under Subsection (k), the |
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person responsible for paying the tax is entitled to a credit |
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against the taxes due under Chapter 201 or this chapter in an amount |
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equal to the amount of tax paid during that period on hydrocarbons |
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produced from the qualifying well. To receive the credit, the |
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person responsible for paying the tax must apply to the comptroller |
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before the expiration of the applicable period for filing a tax |
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refund claim under Section 111.104. |
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(m) A person who makes or submits an application, report, or |
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other document or item of information to the commission or the |
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comptroller under this section that the person knows is false or |
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untrue in a material fact is subject to the penalties imposed by |
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Chapters 85 and 91, Natural Resources Code. |
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(n) A person who applies or attempts to apply for an |
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exemption under this section for hydrocarbons produced from a well |
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the person knows is not a qualifying well is liable to the state for |
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a civil penalty. The amount of the penalty may not exceed the sum |
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of: |
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(1) $10,000; and |
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(2) the difference between the amount of taxes paid or |
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attempted to be paid and the amount of taxes due. |
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(o) The attorney general may recover a penalty under |
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Subsection (n) in a suit brought on behalf of the state. Venue for |
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the suit is in Travis County. |
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(p) The commission may adopt rules necessary to administer |
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this section. |
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SECTION 2. Section 202.062, Tax Code, as added by this Act, |
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applies only to hydrocarbons produced on or after January 1, 2024. |
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SECTION 3. The change in law made by this Act does not |
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affect tax liability accruing before the effective date of this |
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Act. That liability continues in effect as if this Act had not been |
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enacted, and the former law is continued in effect for the |
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collection of taxes due and for civil and criminal enforcement of |
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the liability for those taxes. |
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SECTION 4. This Act takes effect January 1, 2024. |