By Holzheauser H.B. No. 1892
74R5160 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 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 unknown recovery,
2-20 completion, or drilling technique or a new application of an
2-21 existing technique; and
2-22 (B) has a reasonable possibility of increasing
2-23 the ultimate recovery of hydrocarbons.
2-24 (4) "Project" means a well or group of wells in a
2-25 field in which an operator intends to employ a new hydrocarbon
2-26 recovery technique.
2-27 (5) "Successful project" means a well or group of
3-1 wells in a field in which the use of a new hydrocarbon recovery
3-2 technique increases the 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 may apply to the
3-16 commission for approval of the project.
3-17 (b) In addition to the other requirements of this chapter,
3-18 the operator must include with the application a statement of the
3-19 date on which the project begins and the date it will end, subject
3-20 to commission approval, and any other information the comptroller
3-21 requires.
3-22 (c) If the commission approves the project, the commission
3-23 shall issue a certificate to each operator of a well included in
3-24 the project. The certificate must:
3-25 (1) include identification of each well in the
3-26 project;
3-27 (2) state the length of the project; and
4-1 (3) state the date on which the tax exemption takes
4-2 effect and the date on which it expires, subject to the
4-3 comptroller's approval of the exemption under Section 205.006.
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 under this section if the
4-14 project is a successful project.
4-15 (b) In addition to the other requirements of this chapter,
4-16 the operator must include with the application:
4-17 (1) a copy of the certification issued under Section
4-18 205.003 for that project;
4-19 (2) evidence in the form prescribed by the commission
4-20 demonstrating that the new hydrocarbon recovery technique approved
4-21 for that project actually increased the ultimate recovery of
4-22 hydrocarbons; and
4-23 (3) any other evidence the commission requires.
4-24 (c) If the commission finds that the use of the new
4-25 hydrocarbon recovery technique approved under Section 205.003
4-26 increased the ultimate recovery of hydrocarbons, the commission
4-27 shall issue a certificate to each operator of a well that
5-1 participated in the successful project using the same new
5-2 hydrocarbon recovery technique. The commission may not issue
5-3 certificates to more than 100 wells in the field. The commission
5-4 shall determine which wells qualify for certification. The
5-5 certificate must:
5-6 (1) include identification of each well qualifying
5-7 under this section; and
5-8 (2) state the date on which the tax exemption takes
5-9 effect, subject to the comptroller's approval of the exemption
5-10 under Section 205.006.
5-11 (d) The tax exemption, if approved by the comptroller, is
5-12 effective on the first day of the first month after the date on
5-13 which the commission receives the application for certification of
5-14 the project as a successful project.
5-15 Sec. 205.005. APPLICATION FOR ADDITIONAL WELLS. (a) An
5-16 operator of a well located in a field in which a successful project
5-17 has been certified under Section 205.004 may apply to the
5-18 commission for certification of the well under this section if the
5-19 operator uses the same new hydrocarbon recovery technique approved
5-20 by the commission for the successful project.
5-21 (b) The commission may not issue a certificate under this
5-22 section to more than 100 wells in a field, including the original
5-23 wells certified under Section 205.004, for using the same new
5-24 hydrocarbon recovery technique. The commission shall determine
5-25 which wells qualify for certification. The certificate must:
5-26 (1) include identification of each well qualifying
5-27 under this section; and
6-1 (2) state the date on which the tax exemption takes
6-2 effect, subject to the comptroller's approval of the exemption
6-3 under Section 205.006.
6-4 (c) The tax exemption is effective on the first day of the
6-5 first month after the date on which the commission receives the
6-6 application under this section for certification of the well.
6-7 Sec. 205.006. APPLICATION FOR AND APPROVAL OF TAX EXEMPTION.
6-8 (a) To qualify for a tax exemption provided under this chapter for
6-9 an initial project or a successful project, the person responsible
6-10 for paying the tax must apply to the comptroller for the
6-11 appropriate exemption and include with the application the
6-12 certificate issued under Section 205.003, 205.004, or 205.005, as
6-13 appropriate.
6-14 (b) The comptroller may require a person applying for the
6-15 tax exemption to provide any information necessary to administer
6-16 this section.
6-17 (c) The comptroller shall approve a person's application if
6-18 the hydrocarbons are eligible for the tax exemption.
6-19 Sec. 205.007. REVOCATION OF CERTIFICATION. (a) The
6-20 commission may revoke a certificate if the commission finds that
6-21 the well was not eligible for that designation at the time of
6-22 certification.
6-23 (b) The commission shall notify the operator and the
6-24 comptroller that the certificate has been revoked.
6-25 (c) A tax exemption granted under this chapter is
6-26 automatically revoked on the date the certificate is revoked, and
6-27 hydrocarbon production from that well on or after the day after the
7-1 date of revocation is not eligible for the tax exemption.
7-2 Sec. 205.008. COMMISSION DISCRETION AND RULES. The
7-3 commission has broad discretion in administering this chapter and
7-4 may adopt and enforce any appropriate rules or orders that the
7-5 commission finds necessary to administer this chapter.
7-6 Sec. 205.009. TAX CREDIT. (a) If the tax is paid at the
7-7 full rate provided by Chapter 201 or 202 on hydrocarbon production
7-8 on or after the effective date of the tax exemption contained in
7-9 the well certificate but before the date the comptroller approves
7-10 the application for the tax exemption, the operator is entitled to
7-11 a credit on taxes due under Chapter 201 or 202 in an amount equal
7-12 to the tax paid on hydrocarbon production during that period.
7-13 (b) To receive a credit, the operator must apply to the
7-14 comptroller for the credit not later than the first anniversary of
7-15 the date the commission certifies the well.
7-16 Sec. 205.010. PENALTIES. (a) A person is subject to the
7-17 penalties that may be imposed under Chapters 85 and 91, Natural
7-18 Resources Code, if the person makes and submits to the commission
7-19 or the comptroller an application, report, or other document that
7-20 is used or intended to be used for a certification, tax exemption,
7-21 or a tax credit under this chapter and the person knows that the
7-22 application, report, or other document contains a false or untrue
7-23 material fact.
7-24 (b) A person is liable to the state for a civil penalty if
7-25 the person, after receiving notice from the commission that the
7-26 person's certificate has been revoked, applies or attempts to apply
7-27 for a tax exemption for that well using the revoked certificate.
8-1 The amount of the penalty may not exceed the sum of:
8-2 (1) $10,000; and
8-3 (2) the difference between the amount of taxes paid or
8-4 attempted to be paid and the amount of taxes due.
8-5 (c) The attorney general may recover a penalty under
8-6 Subsection (b) in a suit brought on behalf of the state. Venue for
8-7 the suit is in Travis County.
8-8 SECTION 5. This Act takes effect September 1, 1995.
8-9 SECTION 6. The importance of this legislation and the
8-10 crowded condition of the calendars in both houses create an
8-11 emergency and an imperative public necessity that the
8-12 constitutional rule requiring bills to be read on three several
8-13 days in each house be suspended, and this rule is hereby suspended.