H.B. No. 1975
1-1 AN ACT
1-2 relating to tax exemption for oil and gas wells returned to
1-3 productive status after three years of inactivity.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 202.052, Tax Code, is amended to read as
1-6 follows:
1-7 Sec. 202.052. Rate of Tax. (a) The tax imposed by this
1-8 chapter is at the rate of 4.6 percent of the market value of oil
1-9 produced in this state or 4.6 cents for each barrel of 42 standard
1-10 gallons of oil produced in this state, whichever rate results in
1-11 the greater amount of tax.
1-12 (b) For oil produced in this state from a new or expanded
1-13 enhanced recovery project that qualifies under Section 202.054 of
1-14 this code, the rate of the tax imposed by this chapter is 2.3
1-15 percent of the market value of the oil.
1-16 (c) For oil produced in this state from a well that
1-17 qualifies under Section 202.056, the rate of tax imposed by this
1-18 chapter shall be reduced to zero.
1-19 SECTION 2. Section 201.053, Tax Code, is amended to read as
1-20 follows:
1-21 Sec. 201.053. Gas Not Taxed. The tax imposed by this
1-22 chapter does not apply to gas:
1-23 (1) injected into the earth in this state, unless sold
2-1 for that purpose;
2-2 (2) produced from oil wells with oil and lawfully
2-3 vented or flared; <or>
2-4 (3) used for lifting oil, unless sold for that
2-5 purpose<.>; or
2-6 (4) produced in this state from a well that qualifies
2-7 under Section 202.056.
2-8 SECTION 3. Subchapter B, Chapter 202, Tax Code, is amended
2-9 by adding Section 202.056 to read as follows:
2-10 Sec. 202.056. EXEMPTION FOR OIL AND GAS FROM WELLS
2-11 PREVIOUSLY INACTIVE. (a) In this section:
2-12 (1) "Commission" means the Railroad Commission of
2-13 Texas.
2-14 (2) "Hydrocarbons" means any oil or gas produced from
2-15 a well.
2-16 (3) "Three-year inactive well" means any well that
2-17 has not produced in more than one month in the three years prior to
2-18 the date of application for severance tax exemption under this
2-19 section.
2-20 (b) Hydrocarbons produced from a well qualify for a 10-year
2-21 severance tax exemption if the commission designates the well as a
2-22 three-year inactive well. The commission may designate a well
2-23 without an application, or an application may be made to the
2-24 commission for approval under this section. The commission may
2-25 require an applicant to provide the commission with any relevant
3-1 information required to administer this section. The commission
3-2 may require additional well tests to determine well capability as
3-3 it deems necessary. The commission shall notify the comptroller in
3-4 writing immediately if it determines that the operation of the
3-5 three-year inactive well has been terminated or if it discovers any
3-6 information that affects the taxation of the production from the
3-7 designated well.
3-8 (c) If the commission designates a three-year inactive well
3-9 under this section, it shall issue a certificate designating the
3-10 well as a three-year inactive well as defined by Subsection (a)(3)
3-11 of this section. The commission may not designate a well under
3-12 this section after February 29, 1996.
3-13 (d) An application for three-year inactive well
3-14 certification shall be made during the period of September 1, 1993,
3-15 through August 31, 1995, to qualify for the tax exemption under
3-16 this section. Hydrocarbons sold after the date of certification
3-17 are eligible for the tax exemption.
3-18 (e) The commission may revoke a certificate if information
3-19 indicates that a certified well was not a three-year inactive well
3-20 or if other lease production is credited to the certified well.
3-21 Upon notice to the operator from the commission that the
3-22 certificate for tax exemption under this section has been revoked,
3-23 the tax exemption may not be applied to hydrocarbons sold from that
3-24 well from the date of revocation.
3-25 (f) The commission shall adopt all necessary rules to
4-1 administer this section.
4-2 (g) To qualify for the tax exemption provided by this
4-3 section, the person responsible for paying the tax must apply to
4-4 the comptroller. The comptroller shall approve the application of
4-5 a person who demonstrates that the hydrocarbon production is
4-6 eligible for a tax exemption. The comptroller may require a person
4-7 applying for the tax exemption to provide any relevant information
4-8 necessary to administer this section. The comptroller shall have
4-9 the power to establish procedures in order to comply with this
4-10 section.
4-11 (h) If the tax is paid at the full rate provided by Section
4-12 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
4-13 comptroller approves an application for an exemption provided for
4-14 in this chapter, the operator is entitled to a credit against taxes
4-15 imposed by this chapter in an amount equal to the tax paid. To
4-16 receive a credit, the operator must apply to the comptroller for
4-17 the credit not later than the first anniversary after the date the
4-18 commission certifies that the well is a three-year inactive well.
4-19 (i) Penalties
4-20 (1) Any person who makes or subscribes any
4-21 application, report, or other document and submits it to the
4-22 commission to form the basis for an application for a tax exemption
4-23 under this section, knowing that the application, report, or other
4-24 document is false or untrue in a material fact, may be subject to
4-25 the penalties imposed by Chapters 85 and 91, Natural Resources
5-1 Code.
5-2 (2) Upon notice from the commission that the
5-3 certification for a three-year inactive well has been revoked, the
5-4 tax exemption shall not apply to oil or gas production sold after
5-5 the date of notification. Any person who violates this subsection
5-6 is liable to the state for a civil penalty if the person applies or
5-7 attempts to apply the tax exemption allowed by this chapter after
5-8 the certification for a three-year inactive well is revoked. The
5-9 amount of the penalty may not exceed the sum of:
5-10 (A) $10,000; and
5-11 (B) the difference between the amount of taxes
5-12 paid or attempted to be paid and the amount of taxes due.
5-13 (3) The attorney general may recover a penalty under
5-14 Subdivision (2) of this subsection in a suit brought on behalf of
5-15 the state. Venue for the suit is in Travis County.
5-16 SECTION 4. This Act takes effect September 1, 1993.
5-17 SECTION 5. The importance of this legislation and the
5-18 crowded condition of the calendars in both houses create an
5-19 emergency and an imperative public necessity that the
5-20 constitutional rule requiring bills to be read on three several
5-21 days in each house be suspended, and this rule is hereby suspended,
5-22 and that this Act take effect and be in force from and after its
5-23 passage, and it is so enacted.