By Counts H.B. No. 398
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to tax exemption for certain high-cost gas to promote its
1-3 continued production.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sec. 201.057, Tax Code, is amended to read
1-6 follows:
1-7 Sec. 201.057. Temporary 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 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 (b) High-cost gas as defined in Subsection (a)(2)(A) of this
2-24 section produced from a well that is spudded or completed between
2-25 May 24, 1989, and September 1, 1996 is exempt from the tax imposed
3-1 by this chapter during the period beginning September 1, 1991, and
3-2 ending August 31, 2001. High-cost gas produced from a well spudded
3-3 or completed after September 1, 1996 but before September 1, 2002
3-4 shall also be exempt from tax from September 1, 1996 through August
3-5 31, 2007. High-cost gas as defined in Subsection (a)(2)(B) of this
3-6 section produced from any well regardless of spud date or
3-7 completion date is eligible for refunds of tax paid and exemption
3-8 from the tax imposed by this chapter for production occurring
3-9 during the period beginning the first day of the month after
3-10 commission approval of a co-production project and ending August
3-11 31, 2001; provided, however, in the event co-production ceases, the
3-12 exemption shall also cease on the first day of the first calendar
3-13 month that begins on or after the 91st day following the date of
3-14 termination of co-production operations. Tax must be paid when due
3-15 at the rate provided in Section 201.052 of this code for all
3-16 high-cost gas, as defined in Subsection (a)(2)(B) of this section,
3-17 produced on or before July 31, 1995. On or after September 1,
3-18 1995, the operator may apply to the comptroller for a refund and
3-19 shall be entitled to receive a refund of all taxes paid on such
3-20 high-cost gas produced on or after the first day of the calendar
3-21 month after commission approval of the co-production project from
3-22 which such gas was produced and that is otherwise eligible for the
3-23 tax exemption.
3-24 (c) The operator of a proposed or existing gas well,
3-25 including a gas well that has not been completed, or the operator
4-1 of any proposed or existing oil or gas well within a commission
4-2 approved co-production project, may apply to the commission for
4-3 certification that the well produces or will produce high-cost gas.
4-4 The application may be made but is not required to be made
4-5 concurrently with a request for a determination that gas produced
4-6 from the well is high-cost natural gas for purposes of the Natural
4-7 Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) or with a
4-8 request for commission approval of a co-production project. The
4-9 commission may require an applicant to provide the commission with
4-10 any relevant information required to administer this section. For
4-11 purposes of this section, a determination that gas is high-cost
4-12 natural gas for proposed of the Natural Gas Policy Act of 1978 made
4-13 according to the definition of high-cost natural gas provided by
4-14 Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section
4-15 3317), as that section exists on January 1, 1989, or a
4-16 determination that gas is produced from within a commission
4-17 approved co-production project is a certification that the gas is
4-18 high-cost gas for purposes of this section, and in that event
4-19 additional certification is not required to qualify for the
4-20 exemption provided by this section
4-21 (d) To qualify for the exemption provided by this section,
4-22 the person responsible for paying the tax must apply to the
4-23 comptroller. The application must contain the certification of the
4-24 commission that the well produces high-cost gas. An application
4-25 may not be filed before January 1, 1990 or after December 31, <1998>
5-1 2004. The comptroller shall approve the application of a person
5-2 who demonstrates that the gas is eligible for the exemption. The
5-3 comptroller may require a person applying for the exemption to
5-4 provide any relevant information in the person's monthly report
5-5 that the comptroller considers necessary to administer this
5-6 section. The commission shall notify the comptroller in writing
5-7 immediately if it determines that an oil or gas well previously
5-8 certified as producing high-cost gas does not produce high-cost gas
5-9 or if it takes any action or discovers any information that affects
5-10 the eligibility of gas for an exemption under this section.
5-11 (e) If, before the commission certifies that a well produces
5-12 high-cost gas or before the comptroller approves an application for
5-13 an exemption under this section, the tax imposed by this chapter is
5-14 paid on high-cost gas that otherwise qualifies for the exemption
5-15 provided by this section, the producer or producers of the gas are
5-16 entitled to a credit against other taxes imposed by this chapter in
5-17 an amount equal to the amount of the tax paid on the gas that
5-18 otherwise qualified for the exemption on or after the first day of
5-19 the next month after the month in which the application for
5-20 certification under this section was filed with the commission.
5-21 The credit is allocated to each producer according to the
5-22 producer's proportionate share in the gas. To receive a credit,
5-23 one or more of the producers must apply to the comptroller for the
5-24 credit not later than the first anniversary after the date the
5-25 comptroller approves the application for an exemption under this
6-1 section. If a producer demonstrates that the producer does not
6-2 have sufficient tax liability under this chapter to claim the
6-3 credit within five years from the date the application for the
6-4 credit is made, the producer is entitled to a refund in the amount
6-5 of any credit the comptroller determines may not be claimed within
6-6 that five years. Nothing in this subsection shall relieve the
6-7 obligation imposed by Subsection (b) to pay tax when due on
6-8 high-cost gas produced from co-production projects on or before
6-9 July 31, 1995
6-10 (f) An applicant for commission approval of a co-production
6-11 project shall submit a written application for approval to the
6-12 commission. Such application must be filed before January 1, 1994.
6-13 The applicant shall provide the commission with any relevant
6-14 information required to administer this section, including evidence
6-15 demonstrating that the reservoir is eligible for the designation
6-16 and demonstrating the minimum volumes of high-volume water
6-17 withdrawal required to recover oil and/or gas from the reservoir
6-18 that would not be produced by conventional production methods. A
6-19 commission representative may administratively approve the
6-20 application. If the commission representative denies
6-21 administrative approval, the applicant shall have the right to a
6-22 hearing upon request. (As added by Ch. 1197, Laws 1989; as amended
6-23 by Ch. 958, Laws 1993, effective September 1, 1993.)
6-24 SECTION 2. This Act takes effect September 1, 1995.
6-25 SECTION 3. The importance of this legislation and the
7-1 crowded condition of the calendars in both houses create an
7-2 emergency and an imperative public necessity that the
7-3 constitutional rule requiring bills to be read on three several
7-4 days in each house be suspended, and this rule is hereby suspended.