74R12587 E
By Holzheauser, et al. H.B. No. 1892
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 hydrocarbons produced from wells that use new recovery techniques;
1-4 providing a 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 201.056 to read as follows:
1-20 Sec. 201.056. TAX EXEMPTIONS. The exemptions described by
1-21 Section 202.056 and Chapter 205 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 exemption provisions.
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 Section 202.056 and Chapter
2-3 205 apply to <For> oil produced in this state from a well that
2-4 qualifies under Section 202.056 or Chapter 205 subject to the
2-5 certifications and approvals required by those exemption
2-6 provisions<, the rate of tax imposed by this chapter shall be
2-7 reduced to zero>.
2-8 SECTION 4. Subtitle I, Title 2, Tax Code, is amended by
2-9 adding Chapter 205 to read as follows:
2-10 CHAPTER 205. TAX EXEMPTION FOR CERTAIN HYDROCARBONS PRODUCED
2-11 AS A RESULT OF PRODUCTION ENHANCEMENT PROJECT
2-12 Sec. 205.001. DEFINITIONS. In this chapter:
2-13 (1) "Commission" means the Railroad Commission of
2-14 Texas.
2-15 (2) "Hydrocarbons" means any gas, oil, condensate, or
2-16 other liquid hydrocarbons produced from a well.
2-17 (3) "New hydrocarbon recovery technique" means a
2-18 hydrocarbon recovery technique that the commission determines:
2-19 (A) is a previously unproven recovery,
2-20 completion, or drilling technique; and
2-21 (B) has a reasonable possibility of increasing
2-22 the ultimate recovery of hydrocarbons.
2-23 (4) "Project" means a well or group of wells in a
2-24 field for which an operator intends to employ a new hydrocarbon
2-25 recovery technique.
2-26 (5) "Successful project" means a well or group of
2-27 wells in a field for which the commission has determined that the
3-1 use of a new hydrocarbon recovery technique has increased the
3-2 ultimate recovery of hydrocarbons.
3-3 Sec. 205.002. TAX EXEMPTION FOR PROJECT AND SUCCESSFUL
3-4 PROJECT. (a) Hydrocarbons produced from a well that is included
3-5 in an approved project during the period specified by Section
3-6 205.003(d) are exempt from the taxes imposed by Chapters 201 and
3-7 202 in accordance with Section 205.003(d) if the comptroller has
3-8 approved the tax exemption under Section 205.006.
3-9 (b) Hydrocarbons produced from a well in a successful
3-10 project are exempt from the taxes imposed by Chapters 201 and 202
3-11 in accordance with Sections 205.004(d) and 205.005(c) if the
3-12 comptroller has approved the tax exemption under Section 205.006.
3-13 Sec. 205.003. APPLICATION FOR INITIAL PROJECT. (a) The
3-14 operator of one or more wells in a field in which the operator
3-15 intends to employ a new hydrocarbon technique must apply to the
3-16 commission for approval of the project to be eligible for the tax
3-17 exemption under Section 205.002.
3-18 (b) In addition to the other requirements of this chapter,
3-19 the operator must include with the application a statement of the
3-20 date on which the project begins and the date it will end, subject
3-21 to commission approval, and any other information the commission
3-22 requires.
3-23 (c) If the commission approves the project, the commission
3-24 shall issue a certificate to each operator of a well included in
3-25 the project. The certificate must:
3-26 (1) include identification of each well in the
3-27 project;
4-1 (2) state the length of the project; and
4-2 (3) state the date on which the tax exemption takes
4-3 effect and the date on which it expires.
4-4 (d) The tax exemption is effective on the first day the
4-5 project begins and expires on the 90th day after the date the
4-6 project ends.
4-7 (e) The operator shall report to the commission the
4-8 production results from the project not later than the 90th day
4-9 after the date on which the project ends.
4-10 Sec. 205.004. APPLICATION FOR SUCCESSFUL PROJECT. (a) The
4-11 operator of one or more wells included in a project approved under
4-12 Section 205.003 may apply to the commission for certification of
4-13 the project as a successful project.
4-14 (b) In addition to the other requirements of this chapter,
4-15 the operator must include with the application:
4-16 (1) a copy of the certification issued under Section
4-17 205.003 for that project;
4-18 (2) evidence in the form prescribed by the commission
4-19 demonstrating that the new hydrocarbon recovery technique approved
4-20 for that project actually increased the ultimate recovery of
4-21 hydrocarbons; and
4-22 (3) any other information the commission requires.
4-23 (c) If the commission finds that the use of the new
4-24 hydrocarbon recovery technique approved under Section 205.003
4-25 increases the ultimate recovery of hydrocarbons, the commission
4-26 shall issue a certificate to each operator of a well that
4-27 participated in the successful project using the same new
5-1 hydrocarbon recovery technique. The certificate must:
5-2 (1) include identification of each well qualifying
5-3 under this section; and
5-4 (2) state the date on which the tax exemption takes
5-5 effect.
5-6 (d) The tax exemption is effective on the first day of the
5-7 first month after the date on which the commission receives the
5-8 application for certification of the project as a successful
5-9 project.
5-10 Sec. 205.005. APPLICATION FOR ADDITIONAL WELLS. (a) An
5-11 operator of a well located in a field in which a successful project
5-12 has been certified under Section 205.004 may apply to the
5-13 commission for certification of the well under this section if the
5-14 operator uses the same new hydrocarbon recovery technique approved
5-15 by the commission for the successful project.
5-16 (b) The commission may not issue a certificate under this
5-17 section to more than 100 wells in a field, including the original
5-18 wells certified under Section 205.004, for using the same new
5-19 hydrocarbon recovery technique. The commission shall determine
5-20 which wells qualify for certification. The certificate must:
5-21 (1) include identification of each well qualifying
5-22 under this section; and
5-23 (2) state the date on which the tax exemption takes
5-24 effect.
5-25 (c) The tax exemption is effective on the first day of the
5-26 first month after the date on which the commission receives the
5-27 application under this section for certification of the well.
6-1 Sec. 205.006. APPLICATION FOR AND APPROVAL OF TAX EXEMPTION.
6-2 (a) To qualify for a tax exemption provided under this chapter for
6-3 an initial project or a successful project, the person responsible
6-4 for paying the tax must apply to the comptroller for the
6-5 appropriate exemption and include with the application the
6-6 certificate issued under Section 205.003, 205.004, or 205.005, as
6-7 appropriate.
6-8 (b) The comptroller may require a person applying for the
6-9 tax exemption to provide any information necessary to administer
6-10 this section.
6-11 (c) The comptroller shall approve a person's application if
6-12 the hydrocarbons are eligible for the tax exemption.
6-13 Sec. 205.007. REVOCATION OF CERTIFICATION. (a) The
6-14 commission may revoke a certificate if the commission finds that
6-15 the well was not eligible for that designation at the time of
6-16 certification.
6-17 (b) The commission shall notify the operator and the
6-18 comptroller that the certificate has been revoked.
6-19 (c) A tax exemption granted under this chapter is
6-20 automatically revoked on the date the certificate is revoked, and
6-21 hydrocarbon production from that well on or after the day after the
6-22 date of revocation is not eligible for the tax exemption.
6-23 Sec. 205.008. COMMISSION DISCRETION AND RULES. The
6-24 commission has broad discretion in administering this chapter and
6-25 may adopt and enforce any appropriate rules or orders that the
6-26 commission finds necessary to administer this chapter.
6-27 Sec. 205.009. TAX CREDIT. (a) If the tax is paid under
7-1 Chapter 201 or 202 on hydrocarbon production on or after the
7-2 effective date of the tax exemption contained in the well
7-3 certificate but before the date the comptroller approves the
7-4 application for the tax exemption, the operator is entitled to a
7-5 credit on taxes due under Chapter 201 or 202 in an amount equal to
7-6 the tax paid on hydrocarbon production during that period.
7-7 (b) To receive a credit, the operator must apply to the
7-8 comptroller for the credit not later than the first anniversary of
7-9 the date the commission certifies the well.
7-10 Sec. 205.010. PENALTIES. (a) A person is subject to the
7-11 penalties that may be imposed under Chapters 85 and 91, Natural
7-12 Resources Code, if the person makes and submits to the commission
7-13 or the comptroller an application, report, or other document that
7-14 is used or intended to be used for a certification, tax exemption,
7-15 or a tax credit under this chapter and the person knows that the
7-16 application, report, or other document contains a false or untrue
7-17 material fact.
7-18 (b) A person is liable to the state for a civil penalty if
7-19 the person, after receiving notice from the commission that the
7-20 person's certificate has been revoked, applies or attempts to apply
7-21 for a tax exemption for that well using the revoked certificate.
7-22 The amount of the penalty may not exceed the sum of:
7-23 (1) $10,000; and
7-24 (2) the difference between the amount of taxes paid or
7-25 attempted to be paid and the amount of taxes due.
7-26 (c) The attorney general may recover a penalty under
7-27 Subsection (b) in a suit brought on behalf of the state. Venue for
8-1 the suit is in Travis County.
8-2 SECTION 5. This Act takes effect September 1, 1995.
8-3 SECTION 6. The importance of this legislation and the
8-4 crowded condition of the calendars in both houses create an
8-5 emergency and an imperative public necessity that the
8-6 constitutional rule requiring bills to be read on three several
8-7 days in each house be suspended, and this rule is hereby suspended.