By:  Bivins                                            S.B. No. 735
       73R2213 CBH-D
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to an exemption from the gas and oil production taxes for
    1-3  gas and oil produced from discovery wells.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Subchapter B, Chapter 201, Tax Code, is amended
    1-6  by adding Section 201.058 to read as follows:
    1-7        Sec. 201.058.  EXEMPTION FOR PRODUCTION FROM DISCOVERY WELLS.
    1-8  (a)  In this section:
    1-9              (1)  "Commission" means the Railroad Commission of
   1-10  Texas.
   1-11              (2)  "Completion date" means the date on which a well
   1-12  is actually made capable of producing gas, as shown on the
   1-13  completion report filed by the operator with the commission.
   1-14              (3)  "Discovery date" means the completion date for a
   1-15  discovery well.
   1-16              (4)  "Discovery well" means the well that has the
   1-17  earliest completion date in a field that the commission classifies
   1-18  as a new field discovery.
   1-19              (5)  "Operator" means the person responsible for the
   1-20  actual physical operation of a gas well.
   1-21              (6)  "Spud date" means the date on which drilling
   1-22  operations on a well are initiated by cutting the initial hole into
   1-23  the ground, as shown on the completion report filed by the operator
   1-24  with the commission.
    2-1        (b)  Gas, condensate, and other liquid hydrocarbons produced
    2-2  from a discovery well are exempt from the taxes imposed by this
    2-3  chapter if the discovery well has:
    2-4              (1)  a spud date that is on or after September 1, 1993;
    2-5  and
    2-6              (2)  a completion date that is not later than August
    2-7  31, 1995.
    2-8        (c)  To qualify for the exemption, a person must apply in
    2-9  writing to the comptroller for the exemption and include with the
   2-10  application a certification issued by the commission that the gas,
   2-11  condensate, and other liquid hydrocarbons are produced from a
   2-12  discovery well that qualifies for the exemption.
   2-13        (d)  To qualify for certification by the commission, an
   2-14  application for new field discovery for the field in which a well
   2-15  is located must be filed with the commission not later than
   2-16  September 1, 1996.  The commission shall adopt rules relating to
   2-17  the qualifications for certification under this section.
   2-18        (e)  The operator of a discovery well shall report the
   2-19  volumes of the well's gas, condensate, and other liquid hydrocarbon
   2-20  production to the commission and the comptroller in accordance with
   2-21  the commission's production reporting rules.
   2-22        (f)  The comptroller shall revoke the tax exemption for a
   2-23  discovery well if the commission determines after certification
   2-24  that the field in which the well is located is not a new field but
   2-25  is actually a part of another field that has an earlier discovery
   2-26  date and if the commission consolidates the two fields.  A
   2-27  revocation takes effect on the date that the fields are
    3-1  consolidated.  If the fields are consolidated under a contested
    3-2  case proceeding, the revocation takes effect on the date the
    3-3  commission's field consolidation order becomes final and appealable
    3-4  under the Administrative Procedure and Texas Register Act (Article
    3-5  6252-13a, Vernon's Texas Civil Statutes).  If a court on appeal
    3-6  reverses a field consolidation order and the new field discovery is
    3-7  reinstated by court or commission order, the comptroller shall
    3-8  reinstate the tax exemption retroactive to the date the exemption
    3-9  was revoked.
   3-10        (g)  The commission shall notify the comptroller of any
   3-11  action that the commission takes or that a court takes in relation
   3-12  to a commission order that affects the qualification of a well for
   3-13  a tax exemption under this section.
   3-14        (h)  A person is liable to the state for a civil penalty if
   3-15  the person attempts to obtain a tax exemption under this section
   3-16  by:
   3-17              (1)  applying for a new field discovery for a
   3-18  completion that the operator knows or should have known is in an
   3-19  existing field; or
   3-20              (2)  reporting false production volumes.
   3-21        (i)  The penalty provided by Subsection (h) may not exceed
   3-22  the sum of $10,000 plus an amount equal to the difference between
   3-23  the tax required to be paid without the exemption and the tax
   3-24  actually paid.  The attorney general may sue to recover the penalty
   3-25  and the costs of the suit.  The suit must be brought in Travis
   3-26  County or the county in which the defendant resides.  A penalty
   3-27  collected under this section shall be deposited to the credit of
    4-1  the oil-field cleanup fund.
    4-2        SECTION 2.  Subchapter B, Chapter 202, Tax Code, is amended
    4-3  by adding Section 202.055 to read as follows:
    4-4        Sec. 202.055.  EXEMPTION FOR PRODUCTION FROM DISCOVERY WELLS.
    4-5  (a)  In this section:
    4-6              (1)  "Commission" means the Railroad Commission of
    4-7  Texas.
    4-8              (2)  "Completion date" means the date on which a well
    4-9  is actually made capable of producing oil, as shown on the
   4-10  completion report filed by the operator with the commission.
   4-11              (3)  "Discovery date" means the completion date for a
   4-12  discovery well.
   4-13              (4)  "Discovery well" means the well that has the
   4-14  earliest completion date in a field that the commission classifies
   4-15  as a new field discovery.
   4-16              (5)  "Operator" means the person responsible for the
   4-17  actual physical operation of an oil well.
   4-18              (6)  "Spud date" means the date on which drilling
   4-19  operations on a well are initiated by cutting the initial hole into
   4-20  the ground, as shown on the completion report filed by the operator
   4-21  with the commission.
   4-22        (b)  Oil produced from a discovery well is exempt from the
   4-23  taxes imposed by this chapter if the discovery well has:
   4-24              (1)  a spud date that is on or after September 1, 1993;
   4-25  and
   4-26              (2)  a completion date that is not later than August
   4-27  31, 1995.
    5-1        (c)  To qualify for the exemption, a person must apply in
    5-2  writing to the comptroller for the exemption and include with the
    5-3  application a certification issued by the commission that the oil
    5-4  is produced from a discovery well that qualifies for the exemption.
    5-5        (d)  To qualify for certification by the commission, an
    5-6  application for new field discovery for the field in which the well
    5-7  is located must be filed with the commission not later than
    5-8  September 1, 1996.  The commission shall adopt rules relating to
    5-9  the qualifications for certification under this section.
   5-10        (e)  The operator of a discovery well shall report the volume
   5-11  of the well's oil production to the commission and the comptroller
   5-12  in accordance with the commission's production reporting rules.
   5-13        (f)  The comptroller shall revoke the tax exemption for a
   5-14  discovery well if the commission determines after certification
   5-15  that the field in which the well is located is not a new field but
   5-16  is actually part of another field that has an earlier discovery
   5-17  date and if the commission consolidates the two fields.  A
   5-18  revocation takes effect on the date that the fields are
   5-19  consolidated.  If the fields are consolidated under a contested
   5-20  case proceeding, the revocation takes effect on the date the
   5-21  commission's field consolidation order becomes final and appealable
   5-22  under the Administrative Procedure and Texas Register Act (Article
   5-23  6252-13a, Vernon's Texas Civil Statutes).  If a court on appeal
   5-24  reverses a field consolidation order and the new field discovery is
   5-25  reinstated by court or commission order, the comptroller shall
   5-26  reinstate the tax exemption retroactive to the date the exemption
   5-27  was revoked.
    6-1        (g)  The commission shall notify the comptroller of any
    6-2  action that the commission takes or that a court takes in relation
    6-3  to a commission order that affects the qualification of a well for
    6-4  a tax exemption under this section.
    6-5        (h)  A person is liable to the state for a civil penalty if
    6-6  the person attempts to obtain a tax exemption under this section
    6-7  by:
    6-8              (1)  applying for a new field discovery for a
    6-9  completion that the operator knows or should have known is in an
   6-10  existing field; or
   6-11              (2)  reporting false production volumes.
   6-12        (i)  The penalty provided by Subsection (h) may not exceed
   6-13  the sum of $10,000 plus an amount equal to the difference between
   6-14  the tax required to be paid without the exemption and the tax
   6-15  actually paid.  The attorney general may sue to recover the penalty
   6-16  and the costs of the suit.  The suit must be brought in Travis
   6-17  County or the county in which the defendant resides.  A penalty
   6-18  collected under this section shall be deposited to the credit of
   6-19  the oil-field cleanup fund.
   6-20        SECTION 3.  Section 81.111, Natural Resources Code, is
   6-21  amended by adding Subsection (d) to read as follows:
   6-22        (d)  Oil that is exempt from the tax imposed by Chapter 202,
   6-23  Tax Code, is exempt from the tax imposed by this section.
   6-24        SECTION 4.  Section 91.111(c), Natural Resources Code, is
   6-25  amended to read as follows:
   6-26        (c)  The fund consists of:
   6-27              (1)  penalties imposed under Section 85.381 of this
    7-1  code for violation of a law, order, or rule relating to well
    7-2  plugging requirements;
    7-3              (2)  proceeds from bonds and other financial assurances
    7-4  required by this chapter, subject to the refund provisions of
    7-5  Section 91.1091 of this code;
    7-6              (3)  private contributions, including contributions
    7-7  made under Section 89.084 of this code;
    7-8              (4)  expenses collected under Section 89.083 of this
    7-9  code;
   7-10              (5)  drilling permit fees imposed under Subsections (a)
   7-11  and (c) of Section 85.2021 of this code;
   7-12              (6)  civil penalties collected for violations of
   7-13  Chapter 89 of this code or of rules or orders relating to plugging
   7-14  that are adopted under this code;
   7-15              (7)  proceeds collected under Section 89.085 of this
   7-16  code;
   7-17              (8)  interest earned on the funds deposited in the
   7-18  fund;
   7-19              (9)  fees collected under Section 91.104 of this code;
   7-20              (10)  civil penalties or costs recovered under Section
   7-21  91.457 or Section 91.459 of this code;
   7-22              (11)  oil and gas waste hauler permit application fees
   7-23  collected under Section 29.015, Water Code;
   7-24              (12)  costs recovered under Subsection (f) of Section
   7-25  91.113 of this code;
   7-26              (13)  hazardous oil and gas waste generation fees
   7-27  collected under Section 91.605 of this code;
    8-1              (14)  oil-field cleanup regulatory fees on oil
    8-2  collected under Section 81.116 of this code;
    8-3              (15)  oil-field cleanup regulatory fees on gas
    8-4  collected under Section 81.117 of this code;
    8-5              (16)  fees for a reissued certificate collected under
    8-6  Section 85.167 of this code;
    8-7              (17)  fees collected under Subsection (b) of Section
    8-8  91.1013 of this code; <and>
    8-9              (18)  civil penalties collected under Sections 201.058
   8-10  and 202.055, Tax Code; and
   8-11              (19)  legislative appropriations.
   8-12        SECTION 5.  This Act takes effect September 1, 1993.
   8-13        SECTION 6.  The importance of this legislation and the
   8-14  crowded condition of the calendars in both houses create an
   8-15  emergency   and   an   imperative   public   necessity   that   the
   8-16  constitutional rule requiring bills to be read on three several
   8-17  days in each house be suspended, and this rule is hereby suspended.