BILL ANALYSIS


                                                        H.B. 2731
                                            By: Craddick (Bivins)
                                                          Finance
                                                         05-19-95
                              Senate Committee Report (Unamended)
BACKGROUND

The largest source of oil in Texas is the unrecovered oil left in
place when wellbores are plugged and abandoned.  Current law
requires the Texas Railroad Commission to plug all abandoned wells
regardless of their condition or potential use in the future. 
Operators cannot afford to keep non-producing wells open
indefinitely.  There is no legal mechanism for maintaining
environmentally and mechanically sound wells. 

PURPOSE

As proposed, H.B. 2731 creates the Texas Experimental Research and
Recovery Activity program (TERRA) for maintaining non-producing,
but environmentally and mechanically sound wells under the
stewardship of the Texas Railroad Commission (commission).  The
TERRA program will provide operators and research organizations
with a pool of sound wellbores, to which access may be granted
through the commission without the usual oil and gas lease.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is granted
under SECTIONS 2 (Sections 93.003 and 93.037(b), Natural Resources
Code) and 5 (Sec. 202.059, Tax Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. (a)  Sets forth the findings of the Legislature
regarding unrecovered hydrocarbons.

SECTION 2. Amends Title 3b, Natural Resources Code, by adding
Chapter 93, as follows:

 CHAPTER 93.  TEXAS EXPERIMENTAL RESEARCH AND RECOVERY ACTIVITY 
                SUBCHAPTER A.  GENERAL PROVISIONS

     Sec.  93.001.  DEFINITIONS.  Defines "commission," "license
     holder," "mineral interest owner," "operator," "present
     possessory mineral interest," "production test," "responsible
     person," "TERRA," "tract," "wellbore," and "wellsite
     equipment."
     
     Sec.  93.002.  TEXAS EXPERIMENTAL RESEARCH AND RECOVERY
     ACTIVITY.  (a)  Establishes the Texas Experimental Research
     and Recovery Activity (TERRA) in the Texas Railroad Commission
     (commission).
     
     (b)  Sets forth the purpose of TERRA.
     Sec.  93.003.  COMMISSION POWERS.  Authorizes the commission
     to adopt and enforce any appropriate rules or orders that the
     commission finds necessary to administer this chapter.
     
     Sec.  93.004.  TERRA FUND; CERTIFICATION.  (a)  Creates the
     TERRA fund in the state treasury.
     
     (b)  Requires the commission to send to the comptroller, or
       notify the comptroller of certain amounts of money to be
       transferred, for credit to the TERRA fund.
       
       (c)  Requires interest earned on the TERRA fund to be
       credited to the fund.
       
       (d)  Authorizes money in the TERRA fund to be used by the
       commission for certain purposes and administrative and
       program costs.
       
       (e) Prohibits money in the TERRA fund from being used or
       pledged for a purpose described by Subsection (d)(2) unless
       the unobligated money in the TERRA fund exceeds the total
       estimated plugging cost of all unplugged TERRA wellbores.
     Sec.  93.005.  USE OF OIL-FIELD CLEANUP FUND.  Prohibits a
     TERRA wellbore from being plugged with money from the oil-field cleanup fund. 
     
                  SUBCHAPTER B.  TERRA AGREEMENT

     Sec.  93.011.  AGREEMENT BETWEEN COMMISSION AND MINERAL
     INTEREST OWNERS.  (a)  Authorizes a mineral interest owner by
     agreement to designate the Texas  Railroad Commission
     (commission) as its agent and grant to the commission an
     easement for the sole purpose of maintaining and licensing a
     wellbore in TERRA.
     
     (b)  Authorizes the commission to accept a grant of an
       easement from, and become the agent of, a mineral interest
       owner.
       
       (c)  Provides that an easement granted to the commission
       under this chapter is public property held and used on
       behalf of the public solely for the purposes of TERRA as
       provided by this chapter and is not subject to taxation.
       
       (d)  Requires the commission to prepare a form for the
       agreement.  Sets forth the guidelines of the agreement.
       
       (e)  Authorizes the agreement to incorporate by reference
       any provision of this chapter.
       
       (f)  Requires the agreement to contain certain information.
       
       (g)  Provides that the consideration for the granting of the
       easement and the use of any wellsite equipment is
       forbearance by the commission in requiring the mineral
       interest owner's compliance with otherwise applicable rules
       regarding maintenance and plugging of inactive wells, and
       the possibility that participation in TERRA may lead to the
       recovery of hydrocarbons that otherwise would not have been
       recovered for the benefit of the mineral interest owner.
       
       (h)  Requires the commission to file the agreement in the
       office of the clerk of the county in which the wellbore is
       located.  Requires the clerk to record it in the real
       property records without collecting a fee.
     Sec.  93.012.  TERRA EASEMENTS:  EFFECT AND CONDITIONS.  (a) 
     Provides that an easement granted in an agreement under
     Section 93.011 runs with the land and is valid under certain
     conditions.
     
     (b)  Provides that the agreement, including the designation
       of the commission as agent of the mineral interest owner,
       binds all successors in interest of the mineral interest
       owner even though the commission does not have a beneficial
       interest in the mineral estate or the wellbores covered by
       the agreement.
       
       (c)  Provides that a vested mineral or surface interest
       existing at the time an agreement under Section 93.011 is
       executed is not affected by the agreement unless the owner
       of the mineral or surface interest is a party to the
       agreement, ratifies the agreement, or consents to the
       agreement.
       
       (d)  Provides that a mineral interest in a tract on which a
       wellbore covered by an agreement is located that is acquired
       by a person after the person has signed an agreement
       covering the wellbore is bound by the agreement.
     Sec.  93.013.  ACCEPTANCE OF WELLBORES INTO TERRA.  (a) 
     Authorizes the commission to accept an inactive wellbore used
     in connection with the exploration for or production of
     hydrocarbons into TERRA under certain conditions.
     
     (b)  Requires the commission to return the payment under
       Subsection (a)(8) if the wellbore is not accepted into
       TERRA.
       
       (c)  Authorizes the commission to place an abandoned
       wellbore scheduled for plugging with state money under
       Chapter 89 in TERRA if it meets the requirements of
       Subsections (a)(1)-(5).  Requires the commission to transfer
       from the oil-field cleanup fund to the TERRA fund the amount
       of money equal to the commission's estimated plugging costs
       on placement of the wellbore in TERRA.  Authorizes the
       wellbore to be plugged only with money from the TERRA fund
       after the transfer of money and while the wellbore remains
       in TERRA.  Prohibits the oil-field cleanup fund from being
       used to plug a TERRA wellbore.
       
       (d)  Requires the amount of money received into the TERRA
       fund under Subsection (c) to be transferred back to the oil-field cleanup fund if a wellbore transferred to TERRA under
       Subsection (c) is subsequently released.
       
       (e)  Provides that the offer of a wellbore to TERRA or its
       acceptance by the commission is not an abandonment of the
       wellbore or of the lease or the lease purposes by mineral
       interest owner.
       
       (f)  Prohibits the commission from accepting a wellbore into
       TERRA, after September 1, 1999, under Subsection (a)(8)
       unless the TERRA fund balance exceeds the total estimated
       plugging cost of all TERRA wells.
     Sec.  93.014.  EFFECT OF ACCEPTANCE OF WELLBORE INTO TERRA. 
     (a)  Requires the commission to assume the well-plugging
     duties imposed on the last operator by Chapter 89 until the
     wellbore is released from TERRA under Subchapter D on
     acceptance of a wellbore into TERRA.
     
     (b)  Provides that a license holder or the commission is not
       responsible for any discharge or oil and gas waste or other
       substances or materials regulated by the commission under
       Section 91.101 occurring before the wellbore was accepted
       into TERRA.
       
       (c)  Authorizes the commission, after notice and opportunity
       for a hearing, to order restoration of all plugging and
       cleanup responsibility to the mineral interest owner and
       require the mineral interest owner to plug the wellbore and
       to clean up the wellsite, or plug the wellbore and clean up
       the wellsite if a mineral interest owner has materially
       misstated the condition of a wellbore or wellsite and its
       compliance with Section 93.013(a)(4), (5), or (6) in
       connection with the acceptance of the wellbore into TERRA.
       
       (d)  Authorizes the commission to retain as an
       administrative penalty the payment made under Section
       93.013(a)(8) and order reimbursement of any plugging or
       cleanup costs incurred by the commission.
       
       (d)  Provides that acceptance of a wellbore into TERRA or
       transfer of money from the oil-field cleanup fund to the
       TERRA fund does not bar the commencement or continuation of
       an administrative or judicial proceeding, including a
       collection suit, against an operator or other responsible
       person for a violation of a commission rule or order or
       state law.
       
       (f)  Provides that acceptance by the commission of a
       wellbore into TERRA creates a rebuttable presumption that
       the well was in compliance with commission rules at the time
       of acceptance.
       
       (g)  Provides that a mineral interest owner who has signed
       an agreement under Section 93.011 and who is not a license
       holder is not a responsible person for a well covered by the
       agreement and, except as provided by Subsection (c), is not
       responsible under commission rules for plugging, cleaning
       up, or remediating a TERRA wellbore or TERRA wellsite.
       
       (h)  Prohibits the commission or a license holder from being
       held to exercise any fiduciary or similar duty for the
       benefit of a mineral interest owner in the tract on which a
       TERRA wellbore is located.  Provides that an express or
       implied lease covenant does not apply to the commission or
       a license holder in the use or nonuse of a TERRA wellbore.
         SUBCHAPTER C.  LICENSES FOR TERRA WELLBORES
     
     Sec.  93.031.  LICENSE REQUIRED.  Requires a person to have a
     license before a person may use a wellbore as provided by this
     subchapter.
     
     Sec.  93.032.  APPLICATION FOR LICENSE.  (a)  Requires an
     applicant for a license to comply with Subchapters D and E,
     Chapter 91, before the commission may issue a license.
     
     (b)  Requires a separate application to be submitted for
       each oil lease and each gas wellbore.
       
       (c)  Requires an application for a license to be on a form
       prescribed by the commission.
       
       (d)  Authorizes the commission to require an applicant to
       provide any information relating to a tract that is the
       subject of a license, including a legal description of the
       mineral ownership of the tract and identification and
       location of wells. 
       
       (e)  Authorizes the commission to require an applicant to
       provide the commission with agreements under Subchapter B
       executed by owners of reversionary and other mineral
       interests before the license may be issued. 
       
       (f)  Requires the applicant to request in writing
       confidential treatment and clearly mark the documents as
       confidential if an applicant intends to claim that any of
       the information submitted is confidential under Section
       552.110, Government Code, relating to trade secrets or
       Section 552.113, Government Code, relating to geological or
       geophysical information.
       
       (g)  Requires a license to be approved by the commission by
       adoption of a final order and may be in the form of a
       commission order or in some other form prescribed by the
       commission.
       
       (h)  Authorizes the commission to hold a hearing on an
       application for a license and a proposed use in accordance
       with commission rules.
     Sec.  93.033.  LICENSE FEE.  Requires an applicant to submit
     to the commission an administrative fee equal to the lesser of
     $50 for each wellbore or $500 for each tract.  Provides that
     the fee is not refundable.
     
     Sec.  93.034.  LICENSES UNDER TERRA.  (a)  Provides that a
     license entitles a license holder to use the wellbore named in
     the license for the duration of the license solely for the
     purposes of TERRA and in accordance with the license, this
     chapter, and other applicable state law.
     
     (b)  Requires the license holder to comply with all
       commission rules governing the licensed use, including rules
       that require a permit to be issued or an exception to a
       commission rule to be granted.
       
       (c)  Provides that a license holder is the responsible
       person for the licensed wellbores for the duration of the
       license and until any violations of commission rules or
       orders committed by the license holder have been corrected.
       
       (d)  Requires a license to state certain information.
     Sec.  93.035.  LICENSE AMENDMENT AND RENEWAL; PRIORITY.  (a) 
     Authorizes a license to be renewed or amended as provided by
     commission rules.
     
     (b)  Provides that an application for release of a TERRA
       wellbore submitted to the commission under Section 93.052 or
       93.053 has priority over a new license for a TERRA wellbore
       or an amendment or renewal of an existing license.
     Sec.  93.036.  VIOLATION OF LICENSE.  (a)  Authorizes the
     commission to revoke the license of a license holder who
     violates the license or a commission rule or order.
     
     (b)  Authorizes the commission to seek reimbursement of its
       costs and administrative penalties under Chapter 81 or 85,
       proceed against a bond or letter of credit, or pursue both
       remedies.
     Sec.  93.037.  LICENSED USES.  (a)  Authorizes TERRA wellbores
     to be licensed for the collection of data, for production
     testing, or for developmental research on recovery techniques,
     each of which must have a reasonable potential to increase the
     recovery of hydrocarbons from the tract on which the wellbores
     are located.
     
     (b)  Authorizes the commission, by rule or as part of the
       license, to establish terms for licensed uses.
     Sec.  93.038.  EXPIRATION OF LICENSE.  Authorizes the
     commission to release a wellbore under the license as provided
     by Subchapter D; maintain the wellbore in TERRA; or license
     the wellbore to another person.
     
     Sec.  93.039.  WELLSITE EQUIPMENT.  (a)  Authorizes a license
     holder to use, or to remove and safeguard, wellsite equipment
     in which it does not have a legal interest.  Requires a
     license holder to return and properly reinstall all equipment
     removed not later than the 30th day after the date the license
     of the license holder expires unless the equipment  has been
     lawfully claimed by a person with an ownership or security
     interest in the equipment; or a mineral interest owner or the
     owner of the equipment has requested otherwise.
     
     (b)  Provides that the license holder is not required to
       reinstall any wellsite equipment taken from the wellbore or
       wellhead.
       
       (c)  Provides that a person who removes wellsite or
       production equipment from a licensed or unlicensed TERRA
       wellbore is subject to the regulatory jurisdiction of the
       commission under Chapter 81C.  Requires any reimbursement of
       commission costs or administrative penalties assessed or
       civil penalties adjudged in an action against the person for
       violation of commission rules to be deposited into the TERRA
       fund.
     Sec.  93.040.  RESTORATION OF LAND SURFACE.  (a)  Requires the
     license holder to restore the surface of the land, as nearly
     as reasonably possible, to the condition of the land when the
     licensed use commenced not later than the 30th day after the
     date a license expires.
     
     (b)  Provides that this section does not apply if, before
       the 30th day after the date the license expires, the license
       holder, acting under a lease, obtains release of the
       wellbore from TERRA and assumes responsibility for the
       wellbore under state law and commission rules.
     Sec.  93.041.  PRODUCED HYDROCARBONS.  (a)  Authorizes the
     license holder to sell hydrocarbons produced during a
     production test from a TERRA wellbore approved by the
     commission without complying with Chapter 85E.  Provides that
     an allowable is not required to produce hydrocarbons, but the
     license holder shall report all production in accordance with
     commission rules.
     
     (b)  Requires proceeds of any hydrocarbons sold by a license
       holder that are produced during production from a TERRA
       wellbore approved by the commission to be paid unless
       otherwise provided by a lease or other legal document.
       
       (c)  Requires the license holder to make prompt payment in
       accordance with Chapter 91C, unless otherwise provided by a
       lease or other legal document.
       
       (d)  Provides that a mineral interest owner accepting
       payment of a share of the proceeds under this section
       ratifies and consents to the terms of and becomes bound by
       the agreement under Subchapter B that covers the proceeds.
       
       (e)  Provides that the production of a reasonable amount of
       hydrocarbons, to be determined by the commission, from a
       TERRA wellbore during a production test approved by the
       commission is not waste of the corpus or remainder of a
       mineral estate, and Section 64.092, Civil Practice and
       Remedies Code, does not apply to the production.
       
       (f)  Provides that hydrocarbons produced from a TERRA
       wellbore during a production test approved by the commission
       are ordinary production for purposes of determining whether
       a lease requirement that production be continued in paying
       quantities has been met.
     Sec.  93.042.  PREVENTION OF POLLUTION.  Provides that this
     chapter does not limit the commission's authority under this
     title to prevent pollution, plug wells, or  control or clean
     up oil and gas wastes or other substances or material.
     
       SUBCHAPTER D.  RELEASE OF WELLBORES FROM TERRA
     
     Sec.  93.051.  PLUGGING OF WELLBORE.  (a)  Authorizes a
     wellbore to be released from TERRA when it is plugged and
     abandoned in accordance with commission rules.
     
     (b)  Prohibits a person from plugging a TERRA wellbore
       without permission of the commission.
     Sec.  93.052.  REQUEST FOR RELEASE BY MINERAL INTEREST OWNER
     BOUND BY TERRA AGREEMENT.  (a)  Authorizes an owner of a
     present possessory mineral interest in the tract on which the
     wellbore is located who is bound by an agreement under
     Subchapter B relating to the wellbore to file an application
     to release the wellbore from TERRA.
     
     (b)  Prohibits the commission from approving an application
       or releasing a wellbore under this section until the mineral
       interest owner fully complies with all applicable state laws
       and commission rules relating to oil and gas, including
       obtaining all permits or other authorizations required under
       commission rules before the wellbore may be operated or
       plugged, and submits to the commission an amount of money
       that the commission may set, not to exceed twice the
       reasonable plugging cost on the date of release and as
       estimated by the commission.
       
       (c)  Prohibits the payment required under Subsection (b)(2)
       from exceeding the reasonable plugging costs on the date of
       release and as estimated by the commission if the wellbore
       to be released has been in TERRA for one year or less.
       
       (d)  Requires the commission to reduce any payment required
       under Subsections (b)(2) and (c) by the amount of payment by
       a person under Section 93.013(a)(8) under certain
       conditions.
       
       (e)  Prohibits the commission from requiring a payment under
       this section if the applicant agrees to plug the wellbore
       and complies with all commission plugging rules.
       
       (f)  Authorizes the commission to approve the application
       for release, effective not earlier than the day after the
       date the license expires unless the applicant submits a
       written release from the license holder that allows for an
       earlier release date.
       
       (g)  Provides that a person to whom a wellbore is released
       assumes responsibility for plugging of the wellbore and
       cleanup of the site, including all associated costs in
       accordance with state law and commission rules, but the
       license must comply with Sections 93.039 and 93.040.
     Sec.  93.053.  REQUEST FOR RELEASE BY MINERAL INTEREST OWNER
     NOT BOUND BY TERRA AGREEMENT.  (a)  Authorizes an owner of a
     present possessory mineral interest in the tract on which the
     wellbore is located who is not bound by an agreement under
     Subchapter B on the wellbore to request that the wellbore be
     released from TERRA.  
     
     (b)  Prohibits the commission from releasing a wellbore
       under this section until the mineral interest owner is in
       full compliance with all applicable state laws and
       commission rules relating to oil and gas and has obtained
       all permits or other authorization required under commission
       rules before the wellbore may be operated or plugged.
       
       (c)  Authorizes the commission to approve the application
       for release, effective not earlier than the day after the
       date the license expires unless the applicant submits a
       written release from the license holder that allows for an
       earlier release date.
       
       (d)  Makes conforming changes.
     Sec.  93.054.  RELEASE OF TERRA EASEMENTS.  (a)  Requires the
     commission to file a release of all TERRA easements on the
     tract in the office of the clerk of the county in which the
     tract is located.
     
     (b)  Requires the release to contain certain information.
       
       (c)  Provides that the release does not have to be
       acknowledged.
       
       (d)  Requires the clerk to record the release in the real
       property records without collecting a fee.
     Sec.  93.055.  REQUEST FOR RELEASE BY SURFACE OWNER.  (a) 
     Authorizes the owner or owners of at least 50 percent of the
     surface interest in the land on which a TERRA wellbore is
     located to file with the commission a written request to plug
     the wellbore if it has been in TERRA for more than seven
     years.
     
     (b)  Requires the commission to notify all persons who have
       signed the TERRA agreement pertaining to the wellbore and
       any licenses of the wellbore under Section 93.037 of the
       request for commission plugging.  Requires the notice to
       also state that the wellbore will be plugged unless a
       mineral owner obtains release of the wellbore from TERRA
       under Section 93.052 or 93.053 within 90 days, or at the
       expiration of an existing TERRA license, whichever occurs
       later.
       
       (c)  Requires the commission to schedule the wellbore to be
       plugged at the end of any existing licensed use if the
       wellbore is not released from TERRA under Subsection (b).
       
       (d)  Authorizes the commission to require surface owners
       requesting plugging of a TERRA wellbore to provide a copy,
       certified by the clerk of the county in which the land is
       located, of the deed or other instrument under which they
       claim title to the surface estate.
     SUBCHAPTER E.  ADMINISTRATIVE PROCEDURE; LIABILITY
     
     Sec.  93.071.  APPLICABILITY OF ADMINISTRATIVE PROCEDURE ACT. 
     (a)  Provides that Chapter 2001, Government Code, applies to
     a proceeding to revoke a TERRA license and to assess an
     administrative penalty against or require reimbursement from
     a license holder; a proceeding under Section 93.014(c); and a
     hearing required by commission rules on proposed uses.
     
     (b)  Provides that Chapter 2001, Government Code, does not
       apply to a decision by the commission under this chapter on
       acceptance or refusal to accept a wellbore into TERRA; on
       the amount of payment required under Section 93.013(a)(8);
       on the issuance of a license under this chapter; and on the
       conditions of a license.
     Sec.  93.072.  JUDICIAL REVIEW.  Provides that a judicial
     decision described by Section 93.071(b) is not subject to
     judicial review.
     
     Sec.  93.073.  LIABILITY OF STATE, COMMISSION, AND LICENSE
     HOLDERS.  (a)  Sets forth the persons or persons who are
     immune from suit and from liability under any cause of action
     alleging certain actions.
     
     (b)  Provides that the commission and an employee or agent
       of the commission are immune from suit and from liability
       under any cause of action arising from the participation of
       a wellbore in TERRA and alleging wrongful death or injury or
       harm to persons, property, or interests caused by or
       suffered by a license holder.
     SECTION 3.     Amends Chapter 201B, Tax Code, by adding Section
201.058, as follows:

     Sec.  201.058.  TAX EXEMPTIONS.  Provides that the exemptions
     described by Sections 202.056 and 202.059 apply to the taxes
     imposed by this chapter as authorized by and subject to the
     certifications and approvals required by those sections.
     
     SECTION 4.     Amends Section 202.052(c), Tax Code, to provide that the
exemptions described by Sections 202.056 and 202.059 apply to oil
produced in this state from a well that qualifies under Section
202.056 or 202.059, subject to the certifications and approvals
required by those sections.

SECTION 5. Amends Chapter 202B, Tax Code, by adding Section
202.059, as follows:

     Sec.  202.059.  EXEMPTION FOR HYDROCARBONS FROM TERRA WELLS. 
     (a)  Provides that hydrocarbons produced from a well subject
     to an agreement under Chapter 93, Natural Resources Code, and
     under a license issued under that chapter qualify for an
     exemption from the taxes imposed by this chapter and Chapter
     201 if the comptroller approves the tax exemption under
     Subsection (g).
     
     (b)  Provides that hydrocarbons produced from a well
       formerly subject to an agreement under Chapter 93, Natural
       Resources Code, and a license issued under that chapter
       resuming production after participation in TERRA for two
       years qualify for an exemption from the taxes imposed by
       this chapter and Chapter 201 if the comptroller approves the
       tax exemption under Subsection (g).
       
       (c)  Authorizes the commission to certify a well eligible
       for a tax exemption or an application may be made to the
       commission for certification under this section.  Authorizes
       the commission to require an applicant to provide the
       commission with any relevant information required to
       administer this section.  Requires the commission to issue
       a certificate to each operator of the well.  Requires the
       certificate to contain certain information.
       
       (d)  Requires the commission to furnish to the comptroller
       a copy of a certificate of exemption for each well
       qualifying under this section.
       
       (e)  Authorizes the commission to revoke a certificate for
       a tax exemption if information indicates that a well was not
       eligible for that designation at the time of certification
       or if a license issued under Chapter 93, Natural Resources
       Code, is revoked by the commission.  Requires the commission
       to notify the operator and the comptroller that a
       certificate has been revoked.  Provides that a tax exemption
       granted under this section is automatically revoked on the
       date the certificate is revoked, and hydrocarbons produced
       from the well after the date of revocation are not eligible
       for the tax exemption.
       
       (f)  Authorizes the commission to adopt and enforce any
       rules or orders that the commission finds necessary to
       administer this section.
       
       (g)  Requires the person responsible for paying the tax to
       apply to the comptroller for the exemption and include with
       the application the certificate issued by the commission
       under Subsection (c).  Requires the comptroller to approve
       the application of a person if the hydrocarbons are eligible
       for the tax exemption.  Authorizes the comptroller to
       require a person applying for the tax exemption to provide
       any relevant information necessary to administer this
       section.  Authorizes the comptroller to establish procedures
       to comply with this subsection and Subsection (h).
       
       (h)  Entitles the operator to a credit on taxes due under
       Chapter 201 or this chapter in the amount equal to the tax
       paid during that period if the tax is paid at the full rate
       provided by this chapter and Chapter 201 on hydrocarbons
       produced on or after the effective date of the tax exemption
       but before the date the comptroller approves an application
       for the tax exemption.  Requires the operator to apply to
       the comptroller for the credit not later than one year after
       the date the commission certifies the well for a tax
       exemption to receive a credit.
       
       (i)  Subjects a person to the penalties that may be imposed
       under Chapters 85 and 91, Natural Resources Code, if the
       person makes and submits to the commission or comptroller an
       application, report, or other document used or intended to
       be used for a certification, tax exemption, or tax credit
       under this section and the person knows that the
       application, report, or other document contains a false or
       untrue material fact.
       
       (j)  Provides that a person is liable to the state for a
       civil penalty if the person, after receiving notice from the
       commission that the person's tax exemption certificate for
       a TERRA well or a former TERRA well has been revoked,
       applies or attempts to apply for a tax exemption for
       hydrocarbons produced from the well under this revoked
       certificate.  Prohibits the amount of the penalty from
       exceeding a certain sum.
       
       (k)  Authorizes the attorney general to recover a penalty
       under Subsection (j) in a suit brought on behalf of the
       state.  Provides that venue for the suit is in Travis
       County.
       
       (l)  Defines "commission," "hydrocarbons," and "TERRA."
     SECTION 6.     Effective date:  January 1, 1996.

SECTION 7. Emergency clause.