JWB S.B. 1440 75(R)BILL ANALYSIS


WAYS & MEANS
S.B. 1440
By: Wentworth (Holzheauser)
5-16-97
Committee Report (Amended)



BACKGROUND 

According to the Railroad Commission, there are over 72,000 wells
producing less than seven barrel-of-oil equivalents (BOE) per well per
day.  Lower production wells have high production costs and smaller
profits.  Providing a tax break to those leases which show a sustained
increase in production could create an incentive for those operators to
invest in production-enhancing activity.   

PURPOSE

The bill exempts oil and gas that is produced (from qualified leases) that
are the result of an incremental production technique from 50% of the
severance taxes for a period of 5 years.   

RULEMAKING AUTHORITY

Rulemaking authority is granted to the Railroad Commission of Texas in
SECTION 2 of this bill (Section 202.057(e), Tax Code [as added by this
bill]), and references those rules in SECTION 1. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 201.058, Tax Code (Tax Exemptions), to require
certain operators increasing production by  marketing gas from an oil well
or lease that has been released for 12 months or more, pursuant to the
rules of the Railroad Commission of Texas, to be entitled to an exemption
from tax imposed by this chapter.  Makes a conforming change. 

SECTION 2. Amends Subchapter B, Chapter 202, Tax Code (Tax Imposed), by
adding Section 202.057, TAX CREDIT FOR INCREMENTAL PRODUCTION TECHNIQUES.  

Defines "baseline production," "commission," "incremental production,"
"incremental production techniques," "incremental ratio," "qualifying
lease," and "qualified incremental production." Provides that an operator
of a qualifying lease is entitled to a 50 percent tax exemption on that
lease's qualified incremental production for five years provided that
certain provisions are met.  Requires this section to be suspended if the
price of oil reaches $25 per barrel for three months. Sets forth
requirements for receiving a credit against taxes imposed by this chapter.
Requires the Railroad Commission of Texas to adopt rules necessary to
administer this section. 

SECTION 3.  Amends Subchapter H, Chapter 202, Tax Code (Classification of
Tax and Allocation of Revenue), by adding Section 202.354, DEDICATION TO
TEXAS TUITION ASSISTANCE GRANT PROGRAM. 

Provides that revenue collected from incremental production from a
qualifying lease, as defined by Section 202.057, and deposited to the
general revenue fund may only be spent to fund the Texas tuition
assistance grant program under Subchapter G, Chapter 56, Education Code. 

 SECTION 4. Effective date: September 1, 1997.

SECTION 5. Emergency clause.

EXPLANATION OF AMENDMENTS

Committee amendment No. 1 strikes SECTION 3 of the bill, referring to the
dedication of funds collected benefitting the Texas Tuition Assistance
Grant Program.