By Yost H.B. No. 2679
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to reduced tax rates for nominal production oil and gas
1-3 wells.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 201.052, Tax Code, is amended by adding
1-6 subsection (c) to read as follows:
1-7 (c) For gas produced in this state from a nominal production
1-8 gas well that qualifies under Section 201.058 of this code or from
1-9 a nominal production oil well that qualifies under Section 202.055
1-10 of this code, the rate of tax imposed by this chapter is 3.75
1-11 percent of the market value of the gas produced and saved in this
1-12 state by the producer.
1-13 SECTION 2. Section 201.055, Tax Code, is amended by adding
1-14 subsection (c) to read as follows:
1-15 (c) For condensate produced in this state from a nominal
1-16 production gas well that qualifies under Section 201.058 of this
1-17 code, the tax imposed by this section is at the same rate as the
1-18 rate of tax imposed on oil by Section 202.052 subsection (c) of
1-19 this code.
1-20 SECTION 3. Subchapter B, Chapter 201, Tax Code, is amended
1-21 by adding Section 201.058 to read as follows:
1-22 Sec. 201.058. QUALIFICATION OF GAS AND CONDENSATE FROM
1-23 NOMINAL PRODUCTION WELLS FOR REDUCED TAX RATE
2-1 (a) In this section:
2-2 (1) "Commission" means the Railroad Commission of
2-3 Texas.
2-4 (2) "Gas well" means a well that:
2-5 (A) produces gas not associated or blended with
2-6 oil at the time of production;
2-7 (B) produces more than 100,000 cubic feet of gas
2-8 to each barrel of oil from the same producing horizon; or
2-9 (C) produces gas from a formation or producing
2-10 horizon productive of gas only encountered in a well bore through
2-11 which oil is also produced through the inside of another string of
2-12 casing.
2-13 (3) "Nominal production gas well" means any gas well
2-14 that has an average daily gas production rate of 20,000 cubic feet
2-15 per day or less.
2-16 (4) "Reduced gas tax rate" means the tax rate imposed
2-17 by Section 201.052 subsection (c) of this code.
2-18 (5) "Reduced condensate tax rate" means the tax rate
2-19 imposed by Section 201.055 subsection (c) of this code.
2-20 (b) Gas produced from a well qualifies for the reduced gas
2-21 tax rate and condensate produced from a well qualifies for the
2-22 reduced condensate tax rate if the commission designates the well
2-23 as a nominal production gas well.
2-24 (c) The commission may designate a well without an
2-25 application from the operator, or the operator of the well may
3-1 apply to the commission for approval under this section. The
3-2 commission may require an applicant to provide the commission with
3-3 any relevant information required to administer this section.
3-4 (d) If the commission designates a nominal production gas
3-5 well under this section, it shall issue a certificate designating
3-6 the well as a nominal production gas well.
3-7 (e) The reduced gas tax rate and reduced condensate tax rate
3-8 apply only to gas and condensate produced from gas wells that have
3-9 an average daily gas production rate of 20,000 cubic feet or less.
3-10 (f) The commission may revoke the certification authorized
3-11 by this section if the daily gas production rate for a gas well
3-12 exceeds 20,000 cubic feet. Upon notice from the commission that
3-13 the certification for tax rate reduction under this section has
3-14 been revoked, the tax rate reduction may not be applied to gas or
3-15 condensate production sold thereafter.
3-16 (g) The commission has broad discretion in administering
3-17 this section and shall adopt and enforce any rules or orders that
3-18 the commission finds necessary to administer this section. The
3-19 comptroller shall have the power to establish procedures in order
3-20 to comply with this Act.
3-21 (h) To qualify for the reduced gas tax rate and reduced
3-22 condensate tax rate, a person responsible for paying the tax must
3-23 apply to the comptroller. The application must include the
3-24 certification of approval of the commission that the well is a
3-25 nominal production gas well. The comptroller shall approve the
4-1 application of a person who demonstrates that the gas is eligible
4-2 for the reduced gas tax rate. The comptroller may require a person
4-3 applying for the tax rate reduction to provide any relevant
4-4 information that the comptroller considers necessary to administer
4-5 this section. The commission shall notify the comptroller in
4-6 writing immediately if the commission discovers any information
4-7 that affects the taxation of the production from the designated
4-8 well.
4-9 (i) If the tax is paid at the full rate provided by Sections
4-10 201.052(a), 201.052(b), or 201.055(b) of this code before the
4-11 comptroller approves an application for a reduction in the tax rate
4-12 provided for in this chapter, the producer of the gas or condensate
4-13 is entitled to a credit against taxes imposed by this chapter in an
4-14 amount equal to the difference between the tax paid and the tax due
4-15 at the reduced tax rate. To receive a credit, the producer must
4-16 apply to the comptroller for the credit not later than the first
4-17 anniversary after the date the commission certifies that the well
4-18 is a nominal production gas well.
4-19 (j) Any person who violates this subsection is liable to the
4-20 state for a civil penalty if the person applies or attempts to
4-21 apply the tax rate reduction allowed by this section on gas or
4-22 condensate after the certification for tax rate reduction is
4-23 terminated. The amount of the penalty may not exceed the sum of:
4-24 (1) $10,000; and
4-25 (2) the difference between the amount of taxes paid or
5-1 attempted to be paid and the amount of taxes due.
5-2 (k) The Attorney General may recover a penalty under
5-3 subsection (j) of this section in a suit brought on behalf of the
5-4 state. Venue for the suit is in Travis County.
5-5 SECTION 4. Section 202.052, Tax Code, is amended by adding
5-6 subsection (c) to read as follows:
5-7 (c) For oil produced in this state from a nominal production
5-8 oil well that qualifies under Section 202.055 of this code, the
5-9 rate of tax imposed by this chapter is 2.3 percent of the market
5-10 value of the oil.
5-11 SECTION 5. Subchapter B, Chapter 202, Tax Code, is amended
5-12 by adding Section 202.055 to read as follows:
5-13 Sec. 202.055. QUALIFICATION OF OIL AND CASINGHEAD GAS FROM
5-14 NOMINAL PRODUCTION WELLS FOR REDUCED TAX RATE
5-15 (a) In this section:
5-16 (1) "Commission" means the Railroad Commission of
5-17 Texas.
5-18 (2) "Casinghead gas" means gas or vapor indigenous to
5-19 an oil stratum and produced from the stratum with oil.
5-20 (3) "Nominal production oil well" means any oil well
5-21 that has an average daily oil production rate of 3 barrels per day
5-22 or less.
5-23 (4) "Oil well" means any well that produces one barrel
5-24 or more of oil to each 100,000 cubic feet of gas.
5-25 (5) "Reduced gas tax rate" means the tax rate imposed
6-1 by Section 201.052 subsection (c) of this code.
6-2 (6) "Reduced oil tax rate" means the tax imposed by
6-3 Section 202.052 subsection (c) of this code.
6-4 (b) Oil produced from a well qualifies for the reduced oil
6-5 tax rate and casinghead gas produced from a well qualifies for the
6-6 reduced gas tax rate if the commission designates the well as a
6-7 nominal production oil well.
6-8 (c) The commission may designate a well without an
6-9 application from the operator, or the operator of the well may
6-10 apply to the commission for approval under this section. The
6-11 commission may require an applicant to provide the commission with
6-12 any relevant information required to administer this section.
6-13 (d) If the commission designates a nominal production oil
6-14 well under this section, it shall issue a certificate designating
6-15 the well as a nominal production oil well.
6-16 (e) The reduced oil tax rate applies only to oil and the
6-17 reduced gas tax rate applies only to casinghead gas produced from
6-18 oil wells that have an average daily oil production rate of 3
6-19 barrels or less.
6-20 (f) The commission may revoke the certification authorized
6-21 by this section if the daily oil production rate for an oil well
6-22 exceeds 3 barrels. Upon notice from the commission that the
6-23 certification for tax rate reduction under this section has been
6-24 revoked, the tax rate reduction may not be applied to oil or
6-25 casinghead gas production sold thereafter.
7-1 (g) The commission has broad discretion in administering
7-2 this section and shall adopt and enforce any rules or orders that
7-3 the commission finds necessary to administer this section. The
7-4 comptroller shall have the power to establish procedures in order
7-5 to comply with this Act.
7-6 (h) To qualify for a tax reduction, a person responsible for
7-7 paying the tax must apply to the comptroller. The application must
7-8 include the certification of approval of the commission that the
7-9 well is a nominal production oil well. The comptroller shall
7-10 approve the application of a person who demonstrates that the oil
7-11 and casinghead gas is eligible for a reduced tax rate. The
7-12 comptroller may require a person applying for a tax rate reduction
7-13 to provide any relevant that the comptroller considers necessary to
7-14 administer this section. The commission shall notify the
7-15 comptroller in writing immediately if the commission discovers any
7-16 information that affects the taxation of the production from the
7-17 designated well.
7-18 (i) If the tax is paid at the full rate provided by Sections
7-19 201.052(a), 201.052(b), 202.052(a) or 202.052(b) of this code
7-20 before the comptroller approves an application for a reduction in
7-21 the tax rate provided for in this chapter, the producer of the oil
7-22 and casinghead gas is entitled to a credit against taxes imposed by
7-23 this chapter in an amount equal to the difference between the tax
7-24 paid and the tax due at the reduced tax rate. To receive a credit,
7-25 the producer must apply to the comptroller for the credit not later
8-1 than the first anniversary after the date the commission certifies
8-2 that the well is a nominal production oil well.
8-3 (j) Any person who violates this subsection is liable to the
8-4 state for a civil penalty if the person applies or attempts to
8-5 apply a tax rate reduction allowed by this section on oil or
8-6 casinghead gas after the certification for tax rate reduction is
8-7 terminated. The amount of the penalty may not exceed the sum of:
8-8 (1) $10,000; and
8-9 (2) the difference between the amount of taxes paid or
8-10 attempted to be paid and the amount of taxes due.
8-11 (k) The Attorney General may recover a penalty under
8-12 subsection (j) of this section in a suit brought on behalf of the
8-13 state. Venue for the suit is in Travis County.
8-14 SECTION 6. This Act takes effect September 1, 1993.
8-15 SECTION 7. EMERGENCY. The importance of this legislation
8-16 and the crowded condition of the calendars in both houses create an
8-17 emergency and an imperative public necessity that the
8-18 constitutional rule requiring bills to be read on three several
8-19 days in each house be suspended, and this rule is hereby suspended,
8-20 and that this Act take effect and be in force from and after its
8-21 passage, and it is so enacted.