By Counts, Craddick, et al. H.B. No. 398
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the temporary exemption of certain high-cost gas from
1-3 gas production tax.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 201.057, Tax Code, is amended to read as
1-6 follows:
1-7 Sec. 201.057. TEN-YEAR <TEMPORARY> EXEMPTION OF CERTAIN
1-8 HIGH-COST GAS. (a) In this section:
1-9 (1) "Commission" means the Railroad Commission of
1-10 Texas.
1-11 (2) "High-cost gas" means:
1-12 (A) high-cost natural gas as described by
1-13 Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section
1-14 3317), as that section exists on January 1, 1989, without regard to
1-15 whether that section is in effect or whether a determination has
1-16 been made that the gas is high-cost natural gas for purposes of
1-17 that Act; or
1-18 (B) all gas produced from oil wells or gas wells
1-19 within a commission approved co-production project.
1-20 (3) "Commission approved co-production project" means
1-21 a reservoir development project in which the commission has
1-22 recognized that water withdrawals from an oil or gas reservoir in
1-23 excess of specified minimum volumes will result in recovery of
2-1 additional oil and/or gas from the reservoir that would not be
2-2 produced by conventional production methods and where operators of
2-3 wells completed in the reservoir have begun to implement commission
2-4 requirements to withdraw such volumes of water and dispose of such
2-5 water outside the subject reservoir. Reservoirs potentially
2-6 eligible for this designation shall be limited to those reservoirs
2-7 in which oil and/or gas has been bypassed by water encroachment
2-8 caused by production from the reservoir and such bypassed oil
2-9 and/or gas may be produced as a result of reservoir-wide
2-10 high-volume water withdrawals of natural formation water.
2-11 (4) "High-volume water withdrawals" means the
2-12 withdrawal of water from a reservoir in an amount sufficient to
2-13 dewater portions of the reservoir containing oil and/or gas
2-14 previously bypassed by water encroachment.
2-15 (5) "Co-production" means the permanent removal of
2-16 water from an oil and/or gas reservoir in an effort to lower the
2-17 gas-water contact or oil-water contact in the reservoir or to
2-18 reduce reservoir pressure to recover entrained hydrocarbons from
2-19 the reservoir that would not be produced by conventional primary or
2-20 secondary production methods.
2-21 (6) "Operator" means the person responsible for the
2-22 actual physical operation of an oil or gas well.
2-23 (7) "Consecutive months" means months in consecutive
2-24 order, regardless of whether or not a well produces oil or gas
2-25 during any or all such months.
3-1 (b) High-cost gas as defined in Subsection (a)(2)(A) of this
3-2 section produced from a well that is spudded or completed between
3-3 May 24, 1989, and September 1, 1999 <1996>, is exempt from the tax
3-4 imposed by this chapter for the first 120 consecutive calendar
3-5 months beginning on the first day of production, except that the
3-6 120-consecutive-month period can begin no earlier than September 1,
3-7 1991. Taxes must be paid when due at the rate provided in Section
3-8 201.052(a) of this code on all high-cost gas, as defined in
3-9 Subsection (a)(2)(A) of this section, for wells spudded or
3-10 completed between September 1, 1996, and August 31, 1997. On or
3-11 after September 1, 1997, the operator of a well that was spudded or
3-12 completed and that produced high-cost gas between September 1,
3-13 1996, and August 31, 1997, may apply to the comptroller for a
3-14 refund and shall be entitled to receive a refund of all taxes paid
3-15 on high-cost gas produced during such period. Wells spudded or
3-16 completed between September 1, 1996, and August 31, 1997, shall
3-17 also be exempt from the tax imposed by this chapter for a
3-18 120-consecutive-calendar-month period as provided for other wells
3-19 qualifying under this section. The time period for which an
3-20 operator is entitled to a refund under this section shall be
3-21 included for purposes of the calculation of this 120-month period.
3-22 The period of exemption and refund entitlement for any qualifying
3-23 well shall not exceed 120 consecutive calendar months <during the
3-24 period beginning September 1, 1991, and ending August 31, 2001>.
3-25 High-cost gas as defined in Subsection (a)(2)(B) of this section
4-1 produced from any well regardless of spud date or completion date
4-2 is eligible for refunds of tax paid and exemption from the tax
4-3 imposed by this chapter for production occurring during the period
4-4 beginning the first day of the month after commission approval of a
4-5 co-production project and ending August 31, 2001; provided,
4-6 however, in the event co-production ceases, the exemption shall
4-7 also cease on the first day of the first calendar month that begins
4-8 on or after the 91st day following the date of termination or
4-9 co-production operations. Tax must be paid when due at the rate
4-10 provided in Section 201.052 of this code for all high-cost gas, as
4-11 defined in Subsection (a)(2)(B) of this section, produced on or
4-12 before July 31, 1995. On or after September 1, 1995, the operator
4-13 may apply to the comptroller for a refund and shall be entitled to
4-14 receive a refund of all taxes paid on such high-cost gas produced
4-15 on or after the first day of the calendar month after commission
4-16 approval of the co-production project from which such gas was
4-17 produced and that is otherwise eligible for the tax exemption.
4-18 (c) The operator of a proposed or existing gas well,
4-19 including a gas well that has not been completed, or the operator
4-20 of any proposed or existing oil or gas well within a commission
4-21 approved co-production project, may apply to the commission for
4-22 certification that the well produces or will produce high-cost gas.
4-23 Such application, if seeking certification as high-cost gas
4-24 according to Subsection (a)(2)(A), must be made in writing no later
4-25 than August 31, 1999. The application may be made but is not
5-1 required to be made concurrently with a request for a determination
5-2 that gas produced from the well is high-cost natural gas for
5-3 purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. Section
5-4 3301 et seq.) or with a request for commission approval of a
5-5 co-production project. The commission may require an applicant to
5-6 provide the commission with any relevant information required to
5-7 administer this section. For purposes of this section, a
5-8 determination that gas is high-cost natural gas according to
5-9 Subsection (a)(2)(A) <for purposes of the Natural Gas Policy Act of
5-10 1978 made according to the definition of high-cost natural gas
5-11 provided by Section 107, Natural Gas Policy Act of 1978 (15 U.S.C.
5-12 Section 3317), as that section exists on January 1, 1989,> or a
5-13 determination that gas is produced from within a commission
5-14 approved co-production project is a certification that the gas is
5-15 high-cost gas for purposes of this section, and in that event
5-16 additional certification is not required to qualify for the
5-17 exemption provided by this section.
5-18 (d) To qualify for the exemption provided by this section,
5-19 the person responsible for paying the tax must apply to the
5-20 comptroller. The application must contain the certification of the
5-21 commission that the well produces high-cost gas. An application to
5-22 the comptroller for certification according to Subsection (a)(2)(A)
5-23 may not be filed after December 31, 2000. An application to the
5-24 comptroller for certification according to Subsection (a)(2)(B) may
5-25 not be filed before January 1, 1990, or after December 31, 1998.
6-1 The comptroller shall approve the application of a person who
6-2 demonstrates that the gas is eligible for the exemption. The
6-3 comptroller may require a person applying for the exemption to
6-4 provide any relevant information in the person's monthly report
6-5 that the comptroller considers necessary to administer this
6-6 section. The commission shall notify the comptroller in writing
6-7 immediately if it determines that an oil or gas well previously
6-8 certified as producing high-cost gas does not produce high-cost gas
6-9 or if it takes any action or discovers any information that affects
6-10 the eligibility of gas for an exemption under this section.
6-11 (e) If, before the commission certifies that a well produces
6-12 high-cost gas or before the comptroller approves an application for
6-13 an exemption under this section, the tax imposed by this chapter is
6-14 paid on high-cost gas that otherwise qualifies for the exemption
6-15 provided by this section, the producer or producers of the gas are
6-16 entitled to a credit against other taxes imposed by this chapter in
6-17 an amount equal to the amount of the tax paid on the gas that
6-18 otherwise qualified for the exemption on or after the first day of
6-19 the next month after the month in which the application for
6-20 certification under this section was filed with the commission.
6-21 The credit is allocated to each producer according to the
6-22 producer's proportionate share in the gas. To receive a credit,
6-23 one or more of the producers must apply to the comptroller for the
6-24 credit not later than the first anniversary after the date the
6-25 comptroller approves the application for an exemption under this
7-1 section. If a producer demonstrates that the producer does not
7-2 have sufficient tax liability under this chapter to claim the
7-3 credit within five years from the date the application for the
7-4 credit is made, the producer is entitled to a refund in the amount
7-5 of any credit the comptroller determines may not be claimed within
7-6 that five years. Nothing in this subsection shall relieve the
7-7 obligation imposed by Subsection (b) to pay tax when due on
7-8 high-cost gas produced from co-production projects on or before
7-9 July 31, 1995.
7-10 (f) An applicant for commission approval of a co-production
7-11 project shall submit a written application for approval to the
7-12 commission. Such application must be filed before January 1, 1994.
7-13 The applicant shall provide the commission with any relevant
7-14 information required to administer this section, including evidence
7-15 demonstrating that the reservoir is eligible for the designation
7-16 and demonstrating the minimum volumes of high-volume water
7-17 withdrawal required to recover oil and/or gas from the reservoir
7-18 that would not be produced by conventional production methods. A
7-19 commission representative may administratively approve the
7-20 application. If the commission representative denies
7-21 administrative approval, the applicant shall have the right to a
7-22 hearing upon the request.
7-23 SECTION 2. (a) The Railroad Commission of Texas shall file
7-24 with the Legislative Budget Board such information as the
7-25 Legislative Budget Board may request to assess the impact of the
8-1 exemption authorized by this Act, including:
8-2 (1) the number of approved applications;
8-3 (2) the level of drilling activity;
8-4 (3) natural gas production; and
8-5 (4) any other related information and projections as
8-6 requested by the Legislative Budget Board.
8-7 (b) Reports required by this section shall be filed for the
8-8 following time periods no later than the date indicated:
8-9 (1) for the period beginning September 1, 1996,
8-10 through August 31, 1997, the report shall be filed no later than
8-11 November 1, 1997; and
8-12 (2) for the period beginning September 1, 1996,
8-13 through February 28, 1997, the report shall be filed no later than
8-14 April 1, 1997.
8-15 (c) The Railroad Commission of Texas shall, if requested by
8-16 the Legislative Budget Board, provide quarterly reports containing
8-17 the information required by Subsection (a) of this section.
8-18 SECTION 3. This Act takes effect September 1, 1995.
8-19 SECTION 4. The importance of this legislation and the
8-20 crowded condition of the calendars in both houses create an
8-21 emergency and an imperative public necessity that the
8-22 constitutional rule requiring bills to be read on three several
8-23 days in each house be suspended, and this rule is hereby suspended.