By Holzheauser H.B. No. 1406
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to an exemption from the gas production tax for high cost
1-3 gas.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subsections (a), (b), (c) and (d) of Section
1-6 201.057, Tax Code, are amended to read as follows:
1-7 (a) In this section:
1-8 (1) "Commission" means the Railroad Commission of
1-9 Texas.
1-10 (2) "High-cost gas" means:
1-11 (A) high cost natural gas as described by
1-12 Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section
1-13 3317), as that section exists on January 1, 1989, without regard to
1-14 whether that section is in effect or whether a determination has
1-15 been made that the gas is high cost natural gas for purposes of
1-16 that Act;
1-17 (B) any gas well production, including but not
1-18 limited to natural gas, helium, carbon dioxide, hydrogen sulfide
1-19 that is:
1-20 (i) produced from any well the surface
1-21 drilling of which began on or after September 1, 1995, if such
1-22 production is from a completion location which is located at a
1-23 depth of more than 12,000 feet, except that the 12,000 foot depth
2-1 requirement will be reduced 100 feet for each 1 percent of
2-2 non-hydrocarbon impurities in the production stream, at standard
2-3 conditions at the wellhead;
2-4 (ii) produced from a gas well averaging at
2-5 least 3 barrels of water per million cubic feet of gas (3
2-6 Bbl/mmcf);
2-7 (iii) produced from geopressured brine;
2-8 (iv) occluded natural gas produced from
2-9 coal seams;
2-10 (v) salable gas that is removed from EOR
2-11 project injectants if injectant stream is more than 75% injectant;
2-12 (vi) produced from any wells with initial
2-13 shut-in pressure greater than 7,500 psig;
2-14 (vii) produced from Devonian shale; or
2-15 (viii) produced from designated tight
2-16 formations;
2-17 (ix) produced as a result of production
2-18 enhancement work; or
2-19 (x) produced under such other conditions
2-20 as the Commission determines to present extraordinary risks or
2-21 costs; or
2-22 (C) all gas produced from oil wells or gas wells
2-23 within a commission approved coproduction project.
2-24 (3) "Commission approved co-production project" means
2-25 a reservoir development project in which the commission has
3-1 recognized that water withdrawals from an oil or gas reservoir in
3-2 excess of specified minimum volumes will result in recovery of
3-3 additional oil and/or gas from the reservoir that would not be
3-4 produced by conventional production methods and where operators of
3-5 wells completed in the reservoir have begun to implement commission
3-6 requirements to withdraw such volumes of water and dispose of such
3-7 water outside the subject reservoir. Reservoirs potentially
3-8 eligible for this designation shall be limited to those reservoirs
3-9 in which oil and/or gas has been bypassed by water encroachment
3-10 caused by production from the reservoir and such bypassed oil
3-11 and/or gas may be produced as a result of reservoir-wide
3-12 high-volume water withdrawals of natural formation water.
3-13 (4) "High-volume water withdrawals" means the
3-14 withdrawal of water from a reservoir in an amount sufficient to
3-15 dewater portions of the reservoir containing oil and/or gas
3-16 previously bypassed by water encroachment.
3-17 (5) "Co-production" means the permanent removal of
3-18 water from an oil and/or gas reservoir in an effort to lower the
3-19 gas-water contact or oil-water contact in the reservoir or to
3-20 reduce reservoir pressure to recover entrained hydrocarbons from
3-21 the reservoir that would not be produced by conventional primary or
3-22 secondary production methods.
3-23 (6) "Operator" means the person responsible for the
3-24 actual physical operation of an oil or gas well.
3-25 (b) High cost gas as defined in Subdivisions <Subsection>
4-1 (a)(2)(A) and (B) of this section produced from a well that is
4-2 spudded or completed after <between> May 24, 1989, <and September
4-3 1, 1996,> is exempt from the tax imposed by this chapter during the
4-4 period beginning September 1, 1991, and ending ten years from the
4-5 date of first production <August 31, 2001>. High-cost gas as
4-6 defined in Subsection (a)(2)(C)<(B)> of this section produced from
4-7 any well regardless of spud date or completion date is eligible for
4-8 refunds of tax paid and exemption from the tax imposed by this
4-9 chapter for production occurring during the period beginning the
4-10 first day of the month after commission approval of a co-production
4-11 project and ending August 31, 2001; provided, however, in the event
4-12 co-production ceases, the exemption shall also cease on the first
4-13 day of the first calendar month that begins on or after the 91st
4-14 day following the date of termination of co-production operations.
4-15 Tax must be paid when due at the rate provided in Section 201.052
4-16 of this code for all high cost gas, as defined in Subsection
4-17 (a)(2)(C)<(B)> of this section, produced on or before July 31,
4-18 1995. On or after September 1, 1995, the operator may apply to the
4-19 comptroller for a refund and shall be entitled to receive a refund
4-20 of all taxes paid on such high cost gas produced on or after the
4-21 first day of the calendar month after commission approval of the
4-22 co-production project from which such gas was produced and that is
4-23 otherwise eligible for the tax exemption.
4-24 (c) The operator of a proposed or existing gas well,
4-25 including a gas well that has not been completed, or the operator
5-1 of any proposed or existing oil or gas well within a commission
5-2 approved co-production project, may apply to the commission for
5-3 certification that the well produces or will produce high cost gas.
5-4 The application may be made but is not required to be made
5-5 concurrently with a request for a determination that gas produced
5-6 from the well is high cost natural gas for purposes of the Natural
5-7 Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) or with a
5-8 request for commission approved of a co-production project. The
5-9 commission may require an applicant to provide the commission with
5-10 relevant information required to administer this section. For
5-11 purposes of this section, a determination that gas is high cost
5-12 natural gas for purposes of the Natural Gas Policy Act of 1978 made
5-13 according to the definition of high cost natural gas provided by
5-14 Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section
5-15 3317), as that section exists on January 1, 1989, or a
5-16 determination that gas is produced from within a commission
5-17 approved co-production project or that gas is high cost gas
5-18 pursuant to Subdivisions (a)(2)(A) and (B) of this section is a
5-19 certification that the gas is high cost gas for purposes of this
5-20 section, and in that event additional certification is not required
5-21 to qualify for the exemption provided by this section.
5-22 (d) To qualify for the exemption provided by this section,
5-23 the person responsible for paying the tax must apply to the
5-24 comptroller. The application must contain the certification of the
5-25 commission that the well produces high cost gas. An application
6-1 may not be filed before January 1, 1990, or after ten years from
6-2 the date of first production <December 31, 1998>. The comptroller
6-3 shall approve the application of a person who demonstrates that the
6-4 gas is eligible for the exemption. The comptroller may require a
6-5 person applying for the exemption to provide any relevant
6-6 information in the person's monthly report that the comptroller
6-7 considers necessary to administer this section. The commission
6-8 shall notify the comptroller in writing immediately if it
6-9 determines that an oil or gas well previously certified as
6-10 producing high cost gas does not produce high-cost gas or if it
6-11 takes any action or discovers any information that affects the
6-12 eligibility of gas for an exemption under this section.
6-13 SECTION 2. This Act takes effect September 1, 1995.
6-14 SECTION 3. The importance of this legislation and the
6-15 crowded condition of the calendars in both houses create an
6-16 emergency and an imperative public necessity that the
6-17 constitutional rule requiring bills to be read on three several
6-18 days in each house be suspended, and this rule is hereby suspended.