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.