By Counts, Craddick H.B. No. 398
Substitute the following for H.B. No. 398:
By Craddick C.S.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 Exemption of Certain High-Cost Gas.
1-8 (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 and 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 an 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 the reservoir pressure to recover entrained hydrocarbons
2-19 from the reservoir that would not be produced by convention primary
2-20 or 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 by 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, 2006, <1996, is exempt from the tax
3-4 imposed by this chapter during the period beginning September 1,
3-5 1991, and ending August 31, 2001,> is exempt from the tax imposed
3-6 by this chapter for the first 120 consecutive calendar months
3-7 beginning on the first day of production, except that the 120
3-8 consecutive month period can begin no earlier than September 1,
3-9 1991. Taxes must be paid when due at the rate provided in Section
3-10 201.052(a) of this code on all high-cost gas as defined in
3-11 Subsection (a)(2)(A) of this section, for wells spudded or
3-12 completed between September 1, 1996 and August 31, 1997. On or
3-13 after September 1, 1997, the operator of a well that was spudded or
3-14 completed and which produced high-cost gas between September 1,
3-15 1996 and August 31, 1997, may apply to the comptroller for a refund
3-16 and shall be entitled to receive a refund of all taxes paid on
3-17 high-cost gas produced during such period. Wells spudded or
3-18 completed between September 1, 1996 and August 31, 1997, shall also
3-19 be exempt from the tax imposed by this chapter for a 120
3-20 consecutive calendar month period as provided for other wells
3-21 qualifying under this section. The time period for which an
3-22 operator is entitled to a refund under this section shall be
3-23 included for purposes of the calculation of this 120 month period.
3-24 The period of exemption and refund entitlement for any qualifying
3-25 well shall not exceed 120 consecutive calendar months. High-cost
4-1 gas as defined in Subsection (a)(2)(B) of this section produced
4-2 from any well regardless of spud date or completion date is
4-3 eligible for refunds of tax paid and exemption from tax imposed by
4-4 this chapter for production occurring during the period beginning
4-5 the first day of the month after commission approval of a
4-6 co-production project and ending August 31, 2001; provided,
4-7 however, in the event co-production ceases, the exemption shall
4-8 also cease on the first day of the first calendar month that begins
4-9 on or after the 91st day following the date of termination or
4-10 co-production operations. Tax must be paid when due at the rate
4-11 provided in Section 201.052 of this code for all high-cost gas, as
4-12 defined in Subsection (a)(2)(B) of this section produced on or
4-13 before July 31, 1995. On or after September 1, 1995, the operator
4-14 may apply to the comptroller for a refund and shall be entitled to
4-15 receive a refund on all taxes paid on such high-cost gas produced
4-16 on or after the first day of the calendar month after commission
4-17 approval of the co-production project from which such gas was
4-18 produced and that is otherwise eligible for the tax exemption.
4-19 (c) The operator of a proposed or existing gas well,
4-20 including a gas well that has not been completed, or the operator
4-21 of any proposed or existing oil or gas well within a commission
4-22 approved co-production project, may apply to the commission for
4-23 certification that the well produces or will produce high-cost gas.
4-24 Such application, if seeking certification as high-cost gas
4-25 according to subsection (a)(2)(A) of this section, must be made in
5-1 writing no later than August 31, 2006. The application may be made
5-2 but is not required to be made concurrently with a request for a
5-3 determination that gas produced from the well is to be made
5-4 concurrently with a request for a determination that gas produced
5-5 from the well is high-cost natural gas for purposes of the Natural
5-6 Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) or with a
5-7 request for commission approval for a co-production project. The
5-8 commission may require an applicant to provide the commission with
5-9 any relevant information required to administer this section. For
5-10 the purposes of this section, a determination that gas is high-cost
5-11 natural gas according to subsection (a)(2)(A) of this section <for
5-12 purposes of the Natural Gas Policy Act of 1978 made according to
5-13 the definition of high-cost natural gas provided by Section 107,
5-14 Natural Gas Policy Act of 1978 (15 U.S.C. Section 3317) as that
5-15 section exists on January 1, 1989>, or a determination that gas is
5-16 produced from within a commission approved co-production project is
5-17 a certification that the gas is high-cost gas for purposes of this
5-18 section, and in that event additional certification is not required
5-19 to qualify for the exemption provided by this section.
5-20 (d) To qualify for the exemption provided by this section,
5-21 the person responsible for paying the tax must apply to the
5-22 comptroller. The application must contain the certification of the
5-23 commission that the well produces high-cost gas. An application to
5-24 the comptroller for certification according to subsection (a)(2)(A)
5-25 of this section may not be filed after December 31, 2007. An
6-1 application to the comptroller for certification according to
6-2 subsection (a)(2)(B) of this section may not be filed before
6-3 January 1, 1990, or after December 31, 1998. The comptroller shall
6-4 approve the application of a person who demonstrates that the gas
6-5 is eligible for the exemption. The comptroller may require a
6-6 person applying for the exemption to provide any relevant
6-7 information in the person's monthly report that the comptroller
6-8 considers necessary to administer this section. The commission
6-9 shall notify the comptroller in writing immediately if it
6-10 determines that an oil or gas well previously certified as
6-11 producing high-cost gas does not produce high-cost gas or if it
6-12 takes any action or discovers any information that affects the
6-13 eligibility of gas for an exemption under this section.
6-14 (e) If, before the commission certifies that a well produces
6-15 high-cost gas or before the comptroller approves an application for
6-16 an exemption under this section, the tax imposed by this chapter is
6-17 paid on high-cost gas that otherwise qualifies for the exemption
6-18 provided by this section, the producer or producers of the gas are
6-19 entitled to a credit against other taxes imposed by this chapter in
6-20 an amount equal to the amount of the tax paid on the gas that
6-21 otherwise qualified for the exemption on or after the first day of
6-22 the next month after the month in which the application for
6-23 certification under this section was filed with the commission.
6-24 The credit is allocated to each producer according to the
6-25 producer's proportionate share in the gas. To receive a credit,
7-1 one or more of the producers must apply to the comptroller for the
7-2 credit not later than the first anniversary after the date the
7-3 comptroller approves the application for an exemption under this
7-4 section. If a producer demonstrates that the producer does not
7-5 have sufficient tax liability under this chapter to claim the
7-6 credit within five years from the date the application for the
7-7 credit is made, the producer is entitled to a refund in the amount
7-8 of any credit the comptroller determines may not be claimed within
7-9 that five years. Nothing in this subsection shall relieve the
7-10 obligation imposed by Subsection (b) to pay tax when due on
7-11 high-cost gas produced from co-production projects on or before
7-12 July 31, 1995.
7-13 (f) An applicant for commission approval of a co-production
7-14 project shall submit a written application for approval to the
7-15 commission. Such application must be filed before January 1, 1994.
7-16 The applicant shall provide the commission with any relevant
7-17 information required to administer this section, including evidence
7-18 demonstrating that the reservoir is eligible for the designation
7-19 and demonstrating the minimum volumes of high-volume water
7-20 withdrawal required to recover oil and/or gas from the reservoir
7-21 that would not be produced by conventional production methods. A
7-22 commission representative may administratively approve the
7-23 application. If the commission representative denies
7-24 administrative approval, the applicant shall have the right to a
7-25 hearing upon the request.
8-1 SECTION 2. This act takes effect September 1, 1995.
8-2 SECTION 3. The importance of this legislation and the
8-3 crowded condition of the calendars in both houses create an
8-4 emergency and an imperative public necessity that the
8-5 constitutional rule requiring bills to be read on three several
8-6 days in each house be suspended, and this rule is hereby suspended.