By: Wentworth S.B. No. 1440
A BILL TO BE ENTITLED
AN ACT
1-1 relating to tax exemptions on, and the use of certain revenues from
1-2 taxes on, oil and gas production.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 201.058, Tax Code, is amended to read as
1-5 follows:
1-6 Sec. 201.058. TAX EXEMPTIONS. (a) The exemptions described
1-7 by Sections 202.056, 202.057, and 202.059 apply to the taxes
1-8 imposed by this chapter as authorized by and subject to the
1-9 certifications and approvals required by those sections.
1-10 (b) Operators increasing production by marketing gas from an
1-11 oil well or lease that has been released into the air for 12 months
1-12 or more pursuant to the rules of the commission shall be entitled
1-13 to an exemption from the tax imposed by this chapter on the
1-14 production resulting from the marketing of such gas for the life of
1-15 the well or lease.
1-16 SECTION 2. Subchapter B, Chapter 202, Tax Code, is amended
1-17 by adding Section 202.057 to read as follows:
1-18 Sec. 202.057. TAX CREDIT FOR INCREMENTAL PRODUCTION
1-19 TECHNIQUES. (a) In this section:
1-20 (1) "Baseline production" means a lease's average
1-21 monthly production during the four highest months of production in
1-22 the time period from January 1, 1996, through December 31, 1996.
1-23 (2) "Commission" means the Railroad Commission of
2-1 Texas.
2-2 (3) "Incremental production" means production from a
2-3 qualifying lease in excess of the baseline production.
2-4 (4) "Incremental production technique" means any
2-5 secondary or tertiary production enhancement technique. For wells
2-6 in primary production, the use of incremental production techniques
2-7 means that an expenditure of at least $5,000 must have been made to
2-8 cause increased production. Operators must certify to the
2-9 commission that such expenditure has been made to qualify for the
2-10 tax exemption. The incremental production techniques listed in
2-11 this subdivision must cause incremental production from an existing
2-12 oil lease or from a newly drilled single-completion well on an
2-13 existing lease.
2-14 (5) "Incremental ratio" means the amount of a
2-15 qualifying lease's average monthly incremental production during
2-16 the four-month period used to meet the definition of a qualifying
2-17 lease divided by its average monthly total production during the
2-18 same four-month period.
2-19 (6) "Qualifying lease" means a commission-designated
2-20 oil lease whose production during the four-month period used in
2-21 computing the baseline is no more than seven barrels of oil
2-22 equivalents per day per well, excluding gas flared pursuant to the
2-23 rules of the commission, and which has shown incremental production
2-24 for four of five consecutive months during the effective period of
2-25 this bill and after performing an incremental production technique
3-1 within the lease. For purposes of qualifying a lease, production
3-2 per well per day is measured by dividing the sum of lease
3-3 production during the four highest months of production in the
3-4 baseline period by the sum of the number of well-days, where a
3-5 well-day is one well producing for one day.
3-6 (7) "Qualified incremental production" means the
3-7 lease's monthly total production multiplied by the incremental
3-8 ratio.
3-9 (b) An operator of a qualifying lease is entitled to a 50
3-10 percent tax exemption on that lease's qualified incremental
3-11 production for five years provided that:
3-12 (1) the incremental production required to define a
3-13 qualifying lease occurred after September 1, 1997, and before
3-14 December 31, 1998;
3-15 (2) the operator of a qualifying lease applies to the
3-16 commission for a determination of a lease's incremental ratio
3-17 before February 11, 1999; and
3-18 (3) the operator provides to the comptroller a
3-19 commission-certified incremental ratio.
3-20 (c) If the comptroller's average taxable price of crude oil
3-21 reaches $25 per barrel, adjusted to 1997 dollars, for three
3-22 consecutive months, the tax credit under this section shall be
3-23 suspended until the price drops below $25 per barrel, adjusted to
3-24 1997 dollars, for three consecutive months.
3-25 (d) If the tax is paid at the full rate provided by Section
4-1 201.052(a) or (b) or Section 202.052(a) or (b) before the
4-2 comptroller approves an application for an exemption provided in
4-3 this chapter, the operator is entitled to a credit against taxes
4-4 imposed by this chapter in an amount equal to 50 percent of the tax
4-5 paid on the incremental production. To receive the credit, the
4-6 operator must apply to the comptroller for the credit not later
4-7 than the first anniversary after the date the commission certifies
4-8 the incremental ratio for a qualifying lease.
4-9 (e) The commission may enact rules necessary to administer
4-10 the provisions of this section.
4-11 SECTION 3. Subchapter H, Chapter 202, Tax Code, is amended
4-12 by adding Section 202.354 to read as follows:
4-13 Sec. 202.354. DEDICATION TO TEXAS TUITION ASSISTANCE GRANT
4-14 PROGRAM. The revenue collected from any incremental production
4-15 from a qualifying lease, as those terms are defined by Section
4-16 202.057, and deposited to the general revenue fund may only be
4-17 spent to fund the Texas tuition assistance grant program under
4-18 Subchapter G, Chapter 56, Education Code.
4-19 SECTION 4. This Act takes effect September 1, 1997.
4-20 SECTION 5. The importance of this legislation and the
4-21 crowded condition of the calendars in both houses create an
4-22 emergency and an imperative public necessity that the
4-23 constitutional rule requiring bills to be read on three several
4-24 days in each house be suspended, and this rule is hereby suspended.