BILL ANALYSIS C.S.H.B. 676 By: Craddick (Sponsor) Finance 05-19-95 Senate Committee Report (Substituted) BACKGROUND The 73rd Texas Legislature passed H.B. 1975 to provide tax relief for wells which have been returned to active status after three years or more of inactivity. According to the Texas Railroad Commission, the bill has been responsible for a number of wells reworked and again producing. However, condensate, a hydrocarbon and wellbore product, was left out of the legislation, and so it is not included in the tax relief package. The current deadline for applying for the exemption is August 31, 1995. PURPOSE As proposed, C.S.H.B. 676 allows a 10-year severance tax exemption for wells that are brought back to production after 2 years of non-production; expands the definition of hydrocarbons that currently receive tax relief under the Tax Code; and changes the application deadline for the current three-year inactive well program. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 202.056(a), Tax Code, by amending Subdivision (2) and adding Subdivision (4), as follows: (2) Redefines "hydrocarbons" to include hydrocarbon production. (3) Defines "two-year inactive well." SECTION 2. Amends Sections 202.056(b)-(e) and (h), Tax Code, as follows: (b) Makes conforming changes. (c) Prohibits the Railroad Commission (commission) from designating a three-year inactive well under this section after August 31, 1995. Requires the commission to issue a certificate designating the well as a two-year inactive well as defined by Subsection (a)(4) of this section. Prohibits the commission from designating a two-year inactive well under this section after February 28, 1998. (d) Requires an application for two-year inactive well certification to be made during the period of September 1, 1995, through August 31, 1997, to qualify for the tax exemption under this section. (e) and (h) Make conforming changes. SECTION 3. Amends Section 202.056(i)(2), Tax Code, to make conforming changes. SECTION 4. Requires the comptroller of public accounts and the commission, on the effective date of this Act, to conduct a study to determine the overall impact of the effect of the present statutory and regulatory framework, including tax incentives, upon the energy industry and the state, as well as the effect upon the market for and value of oil, gas, and other minerals and environmental impacts. Requires the comptroller and commission to make recommendations to appropriate legislative and regulatory agencies toward maximizing the value of these resources, their economic impact upon the state, and their long-range availability and use. SECTION 5. Effective date: September 1, 1995. SECTION 6. Emergency clause.