1-1 By: Craddick (Senate Sponsor - Bivins) H.B. No. 676
1-2 (In the Senate - Received from the House April 21, 1995;
1-3 April 24, 1995, read first time and referred to Committee on
1-4 Finance; May 19, 1995, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 1; May 19, 1995,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 676 By: Bivins
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to a tax exemption for hydrocarbon production from certain
1-11 inactive oil and gas leases returned to production.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 202.056(a), Tax Code, is amended by
1-14 amending Subdivision (2) and adding Subdivision (4) to read as
1-15 follows:
1-16 (2) "Hydrocarbons" means any oil or gas produced from
1-17 a well, including hydrocarbon production.
1-18 (4) "Two-year inactive well" means any well that has
1-19 not produced in more than one month in the two years prior to the
1-20 date of application for severance tax exemption under this section.
1-21 SECTION 2. Sections 202.056(b)-(e) and (h), Tax Code, are
1-22 amended to read as follows:
1-23 (b) Hydrocarbons produced from a well qualify for a 10-year
1-24 severance tax exemption if the commission designates the well as a
1-25 three-year inactive well or a two-year inactive well. The
1-26 commission may designate a well without an application, or an
1-27 application may be made to the commission for approval under this
1-28 section. The commission may require an applicant to provide the
1-29 commission with any relevant information required to administer
1-30 this section. The commission may require additional well tests to
1-31 determine well capability as it deems necessary. The commission
1-32 shall notify the comptroller in writing immediately if it
1-33 determines that the operation of the three-year inactive well or
1-34 two-year inactive well has been terminated or if it discovers any
1-35 information that affects the taxation of the production from the
1-36 designated well.
1-37 (c) If the commission designates a three-year inactive well
1-38 under this section, it shall issue a certificate designating the
1-39 well as a three-year inactive well as defined by Subsection (a)(3)
1-40 of this section. The commission may not designate a three-year
1-41 inactive well under this section after August 31, 1995 <February
1-42 29, 1996>. If the commission designates a two-year inactive well
1-43 under this section, it shall issue a certificate designating the
1-44 well as a two-year inactive well as defined by Subsection (a)(4) of
1-45 this section. The commission may not designate a two-year inactive
1-46 well under this section after February 28, 1998.
1-47 (d) An application for three-year inactive well
1-48 certification shall be made during the period of September 1, 1993,
1-49 through August 31, 1995, to qualify for the tax exemption under
1-50 this section. An application for two-year inactive well
1-51 certification shall be made during the period of September 1, 1995,
1-52 through August 31, 1997, to qualify for the tax exemption under
1-53 this section. Hydrocarbons sold after the date of certification
1-54 are eligible for the tax exemption.
1-55 (e) The commission may revoke a certificate if information
1-56 indicates that a certified well was not a three-year inactive well
1-57 or a two-year inactive well, as appropriate, or if other lease
1-58 production is credited to the certified well. Upon notice to the
1-59 operator from the commission that the certificate for tax exemption
1-60 under this section has been revoked, the tax exemption may not be
1-61 applied to hydrocarbons sold from that well from the date of
1-62 revocation.
1-63 (h) If the tax is paid at the full rate provided by Section
1-64 201.052(a), 201.052(b), 202.052(a), or 202.052(b) before the
1-65 comptroller approves an application for an exemption provided for
1-66 in this chapter, the operator is entitled to a credit against taxes
1-67 imposed by this chapter in an amount equal to the tax paid. To
1-68 receive a credit, the operator must apply to the comptroller for
2-1 the credit not later than the first anniversary after the date the
2-2 commission certifies that the well is a three-year inactive well or
2-3 a two-year inactive well.
2-4 SECTION 3. Section 202.056(i)(2), Tax Code, is amended to
2-5 read as follows:
2-6 (2) Upon notice from the commission that the
2-7 certification for a three-year inactive well or a two-year inactive
2-8 well has been revoked, the tax exemption shall not apply to oil or
2-9 gas production sold after the date of notification. Any person who
2-10 violates this subsection is liable to the state for a civil penalty
2-11 if the person applies or attempts to apply the tax exemption
2-12 allowed by this chapter after the certification for a three-year
2-13 inactive well or a two-year inactive well is revoked. The amount
2-14 of the penalty may not exceed the sum of:
2-15 (A) $10,000; and
2-16 (B) the difference between the amount of taxes
2-17 paid or attempted to be paid and the amount of taxes due.
2-18 SECTION 4. Upon the effective date of this Act, the
2-19 comptroller of public accounts and the Railroad Commission of Texas
2-20 shall conduct a study, utilizing existing staff and budget
2-21 resources, to determine the overall impact of the effect of the
2-22 present statutory and regulatory framework, including tax
2-23 incentives, upon the energy industry and the state, as well as the
2-24 effect upon the market for and value of oil, gas, and other
2-25 minerals and environmental impacts. Upon conclusion of the study,
2-26 the comptroller and the railroad commission shall make
2-27 recommendations to appropriate legislative and regulatory agencies
2-28 toward maximizing the value of these resources, their economic
2-29 impact upon the state, and their long-range availability and use.
2-30 SECTION 5. This Act takes effect September 1, 1995.
2-31 SECTION 6. The importance of this legislation and the
2-32 crowded condition of the calendars in both houses create an
2-33 emergency and an imperative public necessity that the
2-34 constitutional rule requiring bills to be read on three several
2-35 days in each house be suspended, and this rule is hereby suspended.
2-36 * * * * *