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.