By Craddick H.B. No. 684
74R3594 CBH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an exemption from the oil and gas production taxes for
1-3 certain marginal oil leases remaining in production; providing a
1-4 civil penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 201.053, Tax Code, is amended to read as
1-7 follows:
1-8 Sec. 201.053. GAS NOT TAXED. The tax imposed by this
1-9 chapter does not apply to gas:
1-10 (1) injected into the earth in this state, unless sold
1-11 for that purpose;
1-12 (2) produced from oil wells with oil and lawfully
1-13 vented or flared; or
1-14 (3) used for lifting oil, unless sold for that
1-15 purpose<;-or>
1-16 <(4) produced in this state from a well that qualifies
1-17 under Section 202.056>.
1-18 SECTION 2. Subchapter B, Chapter 201, Tax Code, is amended
1-19 by adding Section 201.058 to read as follows:
1-20 Sec. 201.058. TAX EXEMPTIONS. The exemptions described by
1-21 Sections 202.056 and 202.057 apply to the taxes imposed by this
1-22 chapter as authorized by and subject to the certifications and
1-23 approvals required by those sections.
1-24 SECTION 3. Section 202.052(c), Tax Code, is amended to read
2-1 as follows:
2-2 (c) The exemptions described by Sections 202.056 and 202.057
2-3 apply to <For> oil produced in this state from a well that
2-4 qualifies under Section 202.056 or 202.057, subject to the
2-5 certifications and approvals required by those sections <the rate
2-6 of tax imposed by this chapter shall be reduced to zero>.
2-7 SECTION 4. Subchapter B, Chapter 202, Tax Code, is amended
2-8 by adding Section 202.057 to read as follows:
2-9 Sec. 202.057. EXEMPTION FOR HYDROCARBONS FROM CATEGORY ONE
2-10 MARGINAL LEASES. (a) In this section:
2-11 (1) "Category one marginal lease" means an oil lease
2-12 that the commission certifies as meeting the maximum production
2-13 requirements prescribed by Subsection (e).
2-14 (2) "Commission" means the Railroad Commission of
2-15 Texas.
2-16 (3) "Hydrocarbon" means any oil, gas, condensate, or
2-17 other liquid hydrocarbons produced from a well.
2-18 (4) "Oil lease" means one or more oil wells for which
2-19 the commission has assigned the same lease identification number.
2-20 (b) Hydrocarbon production from a category one marginal
2-21 lease is exempt from the taxes imposed by this chapter and Chapter
2-22 201 if the comptroller has approved the tax exemption under
2-23 Subsection (h).
2-24 (c) The commission shall identify each oil lease that
2-25 qualifies as a category one marginal lease and shall issue a
2-26 certificate to each operator of such a lease. The certificate
2-27 must:
3-1 (1) include identification of the category one
3-2 marginal lease; and
3-3 (2) state the date on which the tax exemption takes
3-4 effect, subject to the comptroller's approval of the exemption
3-5 under Subsection (h).
3-6 (d) The tax exemption is effective on the first day of the
3-7 first month after the 12-month production period required by
3-8 Subsection (e).
3-9 (e) The commission shall certify an oil lease as a category
3-10 one marginal lease if:
3-11 (1) the average daily production of oil from the oil
3-12 lease does not exceed:
3-13 (A) one barrel of oil during any consecutive 12
3-14 months during a period beginning on or after September 1, 1994;
3-15 (B) two barrels of oil during any consecutive 12
3-16 months during a period beginning on or after September 1, 1996; or
3-17 (C) three barrels of oil during any consecutive
3-18 12 months during a period beginning on or after September 1, 1998;
3-19 and
3-20 (2) during at least seven calendar months of the
3-21 12-month period, some oil was produced and reported to the
3-22 commission.
3-23 (f) The 12-consecutive-month production period required by
3-24 Subsection (e) must begin with a month for which some hydrocarbon
3-25 production is reported to the commission.
3-26 (g) For purposes of Subsection (e), the average daily
3-27 production of oil from an oil lease for 12 consecutive months is
4-1 computed by dividing the number of barrels of oil produced from the
4-2 oil lease during the period by the number of days in months in
4-3 which some oil production was reported to the commission and that
4-4 were in the period, and dividing the quotient by the number of
4-5 wells from which some oil was produced during the period in the oil
4-6 lease. Production is determined under this section by rounding up
4-7 to the nearest barrel of oil produced.
4-8 (h) To qualify for the tax exemption, the person responsible
4-9 for paying the tax must apply to the comptroller for the exemption
4-10 and include with the application a certificate issued by the
4-11 commission under Subsection (c). The comptroller may require a
4-12 person applying for the tax exemption to provide any information
4-13 necessary to administer this section. The comptroller shall
4-14 approve a person's application if the hydrocarbons are eligible
4-15 for the tax exemption. The comptroller may establish procedures as
4-16 necessary to comply with this subsection and Subsection (k).
4-17 (i) The commission may revoke a category one marginal lease
4-18 certificate if the commission finds that the lease was not
4-19 eligible for that designation at the time of certification. The
4-20 commission shall notify the operator and the comptroller that the
4-21 certificate has been revoked. A tax exemption granted under this
4-22 section is automatically revoked on the date the category one
4-23 marginal lease certificate is revoked, and hydrocarbons produced
4-24 from that lease on or after the day after the date of revocation
4-25 are not eligible for the tax exemption.
4-26 (j) The commission has broad discretion in administering
4-27 this section and may adopt and enforce any appropriate rules or
5-1 orders that the commission finds necessary to administer this
5-2 section.
5-3 (k) If the tax is paid at the full rate provided by this
5-4 chapter or Chapter 201 on hydrocarbons produced on or after the
5-5 effective date of the tax exemption contained in the lease
5-6 certificate but before the date the comptroller approves the
5-7 application for the tax exemption, the operator is entitled to a
5-8 credit on taxes due under Chapter 201 or this chapter in the amount
5-9 equal to the tax paid during that period. To receive a credit, the
5-10 operator must apply to the comptroller for the credit not later
5-11 than the first anniversary of the date the commission certifies the
5-12 well as a category one marginal lease.
5-13 (l) A person is subject to the penalties that may be imposed
5-14 under Chapters 85 and 91, Natural Resources Code, if the person
5-15 makes and submits to the commission or the comptroller an
5-16 application, report, or other document used or intended to be used
5-17 for a certification, tax exemption, or tax credit under this
5-18 section and the person knows that the application, report, or other
5-19 document contains a false or untrue material fact.
5-20 (m) A person is liable to the state for a civil penalty if
5-21 the person, after receiving notice from the commission that the
5-22 person's certificate for a category one marginal lease has been
5-23 revoked, applies or attempts to apply for a tax exemption for that
5-24 lease using the revoked certificate. The amount of the penalty may
5-25 not exceed the sum of:
5-26 (1) $10,000; and
5-27 (2) the difference between the amount of taxes paid or
6-1 attempted to be paid and the amount of taxes due.
6-2 (n) The attorney general may recover a penalty under
6-3 Subsection (m) in a suit brought on behalf of the state. Venue for
6-4 the suit is in Travis County.
6-5 SECTION 5. This Act takes effect September 1, 1995.
6-6 SECTION 6. The importance of this legislation and the
6-7 crowded condition of the calendars in both houses create an
6-8 emergency and an imperative public necessity that the
6-9 constitutional rule requiring bills to be read on three several
6-10 days in each house be suspended, and this rule is hereby suspended.