1-1           By:  Ratliff, Bivins                             S.B. No. 582

 1-2           (In the Senate - Filed February 12, 1997; February 18, 1997,

 1-3     read first time and referred to Committee on Finance;

 1-4     February 25, 1997, reported favorably by the following vote:  Yeas

 1-5     10, Nays 0; February 25, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to the application of the oil production tax to new or

 1-9     expanded enhanced recovery projects.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11           SECTION 1.  Subsection (b), Section 202.054, Tax Code, as

1-12     amended by Chapters 335 and 958, Acts of the 73rd Legislature,

1-13     1993, is amended to read as follows:

1-14           (b)  Oil produced from an enhanced recovery project other

1-15     than a co-production project qualifies for the recovered oil tax

1-16     rate if, before the project begins active operation, the commission

1-17     approves the project and designates the area to be affected by the

1-18     project.  The incremental production from an expanded enhanced

1-19     recovery project other than a co-production project qualifies for

1-20     the recovered oil tax rate if, before the expansion begins, the

1-21     commission approves the expansion and designates the area to be

1-22     affected by the expansion.  For a new or expanded enhanced recovery

1-23     project, other than a co-production project, for which an

1-24     application for approval under this section is filed with the

1-25     commission on or after January 1, 1994, severance tax for all oil

1-26     produced during the period from January 1, 1994, through August 31,

1-27     1995, to which the recovered tax rate is applicable, must be paid

1-28     when due at the rate provided by Section 202.052(a) of this code.

1-29     On or after January 1, 1996, the payor may apply to the comptroller

1-30     for and shall be entitled to receive a tax credit equal to the

1-31     difference between the tax paid and the tax which would have been

1-32     due at the recovered oil tax rate for all production to which the

1-33     recovered tax rate is applicable during the period from January 1,

1-34     1994, through August 31, 1995.  The tax credit may be applied to

1-35     either oil or gas severance taxes regardless of the field from

1-36     which the production originates.  Oil produced from a commission

1-37     approved co-production project, whether a new enhanced recovery

1-38     project or an expanded enhanced recovery project, qualifies for the

1-39     recovered oil tax rate following commission certification of a

1-40     positive production response without regard to whether the

1-41     commission approval is before or after the project began active

1-42     operations; provided, however, tax must be paid when due at the

1-43     rate provided in Section 202.052(a) of this code for all oil

1-44     produced on or before July 31, 1995.  On or after September 1,

1-45     1995, the operator may apply to the comptroller for a refund and

1-46     shall be entitled to receive a refund equal to the difference

1-47     between the tax paid on all oil produced from a commission approved

1-48     co-production project after commission certification of a positive

1-49     production response and the tax due at the recovered oil tax rate

1-50     for all oil produced after commission certification of a positive

1-51     production response from such co-production project.  The operator

1-52     of a proposed project or[,] a proposed expansion[, or a proposed or

1-53     existing co-production project] may apply to the commission for

1-54     approval of the project or expansion under this section.  The

1-55     commission may require an applicant to provide the commission with

1-56     any relevant information required to administer this section.  If

1-57     approval by the commission of a unitization agreement under

1-58     Subchapter B, Chapter 101, Natural Resources Code, is required for

1-59     purposes of carrying out the project or expansion, the commission

1-60     may not approve the project or expansion unless it approves the

1-61     unitization agreement.  A person may apply for approval of a

1-62     proposed enhanced recovery project or[,] a proposed expansion[, or

1-63     a proposed co-production project] under this subsection

1-64     concurrently with an application for approval of a unitization

 2-1     agreement for purposes of carrying out the enhanced recovery

 2-2     project or expansion under Section 101.011, Natural Resources Code,

 2-3     or with an application for certification of the project or

 2-4     expansion as a tertiary recovery project for purposes of Section

 2-5     4993, Internal Revenue Code of 1986, or may make a separate

 2-6     application for approval.

 2-7           SECTION 2.  Subsection (c), Section 202.054, Tax Code, is

 2-8     amended to read as follows:

 2-9           (c)  This section applies to an enhanced recovery project

2-10     that begins active operation on or after September 1, 1989, and to

2-11     an expansion that the commission approves on or after September 1,

2-12     1991.  An application for approval under this section must be filed

2-13     on or after September 1, 1989, and before January 1, 2008 [1998],

2-14     for a new enhanced recovery project[, including any co-production

2-15     project].  An application for approval under this section must be

2-16     filed on or after September 1, 1991, and before January 1, 2008

2-17     [1998], for an expansion of an existing enhanced recovery project.

2-18     A project may not qualify as an expansion if the project has

2-19     qualified as a new enhanced recovery project under this section.

2-20     An application may be filed on or after September 1, 1989, even if

2-21     a separate application for approval of the project or expansion has

2-22     already been filed under Subchapter B, Chapter 101, Natural

2-23     Resources Code, or for approval as a tertiary recovery project for

2-24     purposes of Section 4993, Internal Revenue Code of 1986, if the

2-25     operation of a new project or the expansion of an existing project,

2-26     other than a co-production project, does not begin before the

2-27     application for approval under this section is approved by the

2-28     commission; provided, however, nothing herein shall require

2-29     commission approval of a co-production project prior to commencing

2-30     active operations on such project in order for such project to be

2-31     eligible for the recovered oil tax rate.

2-32           SECTION 3.  This Act takes effect September 1, 1997.

2-33           SECTION 4.  The importance of this legislation and the

2-34     crowded condition of the calendars in both houses create an

2-35     emergency and an imperative public necessity that the

2-36     constitutional rule requiring bills to be read on three several

2-37     days in each house be suspended, and this rule is hereby suspended.

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