By: Armbrister S.B. No. 796
73R6308 E
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the establishment of an economic limit factor for
1-3 certain oil production and to oil and gas production as the result
1-4 of new drilling technology.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subchapter B, Chapter 202, Tax Code, is amended
1-7 by adding Section 202.055 to read as follows:
1-8 Sec. 202.055. POLICY. The legislature finds and declares
1-9 that the maximization of the economic life of the oil reserves in
1-10 Texas is a matter of highest priority and urgency. Maximizing the
1-11 economic life of the oil reserves in Texas is vital to the nation,
1-12 the state, and the people of Texas. It is the policy of the State
1-13 of Texas to maintain the current economic life of the oil reserves
1-14 in Texas and to increase the economic life of the oil reserves in
1-15 Texas. Further, it is the policy of the State of Texas to
1-16 encourage the development and use of all current and state of the
1-17 art oil and gas recovery processes and technologies in the
1-18 production of the oil and gas reserves in Texas.
1-19 SECTION 2. Subchapter C, Chapter 202, Tax Code, is amended
1-20 by adding Section 202.056 to read as follows:
1-21 Sec. 202.056. ECONOMIC LIMIT FACTOR OF CERTAIN OIL. (a) In
1-22 this section:
1-23 (1) "Base production rate" means the volume of fluids,
1-24 if any, reported on a monthly basis for an oil well to the
2-1 commission on the proper form for a period of 12 months.
2-2 (2) "Commission" means the Railroad Commission of
2-3 Texas.
2-4 (3) "Current production rate" means the daily volume
2-5 of fluids produced from an oil well as properly reported to the
2-6 commission for the applicable month.
2-7 (4) "Exemption period" means each month during which
2-8 neither the price quoted for West Texas Intermediate nor the price
2-9 quoted for West Texas Sour, as reported in the Wall Street Journal
2-10 on the first Monday of the month, is above $25 per barrel.
2-11 (b) To maximize the recovery of the oil reserves in Texas,
2-12 to lessen the dependence on imported oil, and to encourage the
2-13 exploration, development, and production of Texas oil reserves, the
2-14 legislature establishes an economic limit factor of .25 during the
2-15 exemption period for the first three barrels of oil of an oil
2-16 well's current production rate after September 1, 1993, and the
2-17 rate imposed by this chapter shall be multiplied by the economic
2-18 limit factor in calculating the tax due.
2-19 (c) To maximize the recovery of the oil reserves in Texas,
2-20 to lessen the dependence on imported oil, and to encourage the
2-21 exploration, development, and production of Texas oil reserves, the
2-22 legislature establishes an economic limit factor of .50 during the
2-23 exemption period for oil produced after September 1, 1993, from an
2-24 oil well that had a base production rate less than or equal to 10
2-25 barrels of oil per day and has a current production rate less than
2-26 or equal to 10 barrels of oil per day and 90 percent of the current
2-27 production rate is water. The tax imposed by this chapter on the
3-1 first three barrels of production shall be calculated in accordance
3-2 with Subsection (b) and the tax rate imposed by this chapter on the
3-3 remaining production shall be multiplied by the economic limit
3-4 factor set out in this subsection in calculating the tax due.
3-5 (d) The operator shall verify and report to the comptroller,
3-6 upon a form and in the manner prescribed by the comptroller, the
3-7 current production rate of each oil well either on an individual
3-8 well basis or on a lease basis for the applicable oil wells on the
3-9 lease for which the operator is applying Subsections (b) and (c).
3-10 The operator shall retain a copy of all reports and forms used to
3-11 report the well's base production rate and the well's current
3-12 production rate to the commission for a period of ____ years. The
3-13 comptroller shall have the right to audit said reports and forms
3-14 for a period of _____ years from the month in which the operator
3-15 filed the report with the comptroller. The comptroller shall
3-16 prescribe a reasonable penalty and interest for violations of the
3-17 terms of this section in an amount not to exceed _____ times the
3-18 amount of the under-reported tax due.
3-19 SECTION 3. Subchapter B, Chapter 201, Tax Code, is amended
3-20 by adding Section 201.058 to read as follows:
3-21 Sec. 201.058. NEW TECHNOLOGY PRODUCTION TAX EXEMPTION. (a)
3-22 To promote new technology for the exploration, development, and
3-23 production of natural gas and crude oil within the state, all
3-24 natural gas and crude oil produced from any well drilled after
3-25 September 1, 1993, using horizontal well technology, or some other
3-26 new drilling technology certified by the Railroad Commission of
3-27 Texas, shall be exempt from the tax imposed by this chapter for a
4-1 period of 12 months beginning with the first day of the fourth
4-2 month in which production of natural gas or crude oil production
4-3 was sold in commercial quantities.
4-4 (b) The Railroad Commission of Texas shall prescribe
4-5 reasonable regulations for the certification of new drilling
4-6 technology.
4-7 (c) The operator of each well drilled after September 1,
4-8 1993, using horizontal well technology, or some other new
4-9 technology certified by the Railroad Commission of Texas, shall
4-10 verify and report to the comptroller, upon a form and in a manner
4-11 prescribed by the comptroller, within 30 days of the date of first
4-12 production from the well the identification number of the well, a
4-13 copy of the drilling permit issued by the Railroad Commission of
4-14 Texas, the date of first production as verified by attaching a copy
4-15 of the first production report submitted to the Railroad Commission
4-16 of Texas, and the date the exemption provided for in Subsection (a)
4-17 shall cease.
4-18 SECTION 4. Subchapter B, Chapter 202, Tax Code, is amended
4-19 by adding Section 202.055 to read as follows:
4-20 Sec. 202.055. NEW TECHNOLOGY PRODUCTION TAX EXEMPTION. (a)
4-21 To promote new technology for the exploration, development, and
4-22 production of natural gas and crude oil within the state, all
4-23 natural gas and crude oil produced from any well drilled after
4-24 September 1, 1993, using horizontal well technology, or some other
4-25 new drilling technology certified by the Railroad Commission of
4-26 Texas, shall be exempt from the tax imposed by this chapter for a
4-27 period of 12 months beginning with the first day of the fourth
5-1 month in which production of natural gas or crude oil production
5-2 was sold in commercial quantities.
5-3 (b) The Railroad Commission of Texas shall prescribe
5-4 reasonable regulations for the certification of new drilling
5-5 technology.
5-6 (c) The operator of each well drilled after September 1,
5-7 1993, using horizontal well technology, or some other new
5-8 technology certified by the Railroad Commission of Texas, shall
5-9 verify and report to the comptroller, upon a form and in a manner
5-10 prescribed by the comptroller, within 30 days of the date of first
5-11 production from the well the identification number of the well, a
5-12 copy of the drilling permit issued by the Railroad Commission of
5-13 Texas, the date of first production as verified by attaching a copy
5-14 of the first production report submitted to the Railroad Commission
5-15 of Texas, and the date the exemption provided for in Subsection (a)
5-16 shall cease.
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.