1-1 By: Wentworth S.B. No. 1440
1-2 (In the Senate - Filed March 13, 1997; March 19, 1997, read
1-3 first time and referred to Committee on Finance; May 6, 1997,
1-4 reported adversely, with favorable Committee Substitute by the
1-5 following vote: Yeas 7, Nays 0; May 6, 1997, sent to printer.)
1-6 COMMITTEE SUBSTITUTE FOR S.B. No. 1440 By: Wentworth
A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to tax exemptions on oil and gas production.
1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10 SECTION 1. Section 201.058, Tax Code, is amended to read as
1-11 follows:
1-12 Sec. 201.058. TAX EXEMPTIONS. (a) The exemptions described
1-13 by Sections 202.056, 202.057, and 202.059 apply to the taxes
1-14 imposed by this chapter as authorized by and subject to the
1-15 certifications and approvals required by those sections.
1-16 (b) Operators increasing production by marketing gas from an
1-17 oil well or lease that has been released into the air for 12 months
1-18 or more pursuant to the rules of the commission shall be entitled
1-19 to an exemption from the tax imposed by this chapter on the
1-20 production resulting from the marketing of such gas for the life of
1-21 the well or lease.
1-22 SECTION 2. Subchapter B, Chapter 202, Tax Code, is amended
1-23 by adding Section 202.057 to read as follows:
1-24 Sec. 202.057. TAX CREDIT FOR INCREMENTAL PRODUCTION
1-25 TECHNIQUES. (a) In this section:
1-26 (1) "Baseline production" means a lease's average
1-27 monthly production during the four highest months of production in
1-28 the time period from January 1, 1996, through December 31, 1996.
1-29 (2) "Commission" means the Railroad Commission of
1-30 Texas.
1-31 (3) "Incremental production" means production from a
1-32 qualifying lease in excess of the baseline production.
1-33 (4) "Incremental production technique" means any
1-34 secondary or tertiary production enhancement technique. For wells
1-35 in primary production, the use of incremental production techniques
1-36 means that an expenditure of at least $5,000 must have been made to
1-37 cause increased production. Operators must certify to the
1-38 commission that such expenditure has been made to qualify for the
1-39 tax exemption. The incremental production techniques listed in
1-40 this subdivision must cause incremental production from an existing
1-41 oil lease or from a newly drilled single-completion well on an
1-42 existing lease.
1-43 (5) "Incremental ratio" means the amount of a
1-44 qualifying lease's average monthly incremental production during
1-45 the four-month period used to meet the definition of a qualifying
1-46 lease divided by its average monthly total production during the
1-47 same four-month period.
1-48 (6) "Qualifying lease" means a commission-designated
1-49 oil lease whose production during the four-month period used in
1-50 computing the baseline is no more than seven barrels of oil
1-51 equivalents per day per well, excluding gas flared pursuant to the
1-52 rules of the commission, and which has shown incremental production
1-53 for four of five consecutive months during the effective period of
1-54 this bill and after performing an incremental production technique
1-55 within the lease. For purposes of qualifying a lease, production
1-56 per well per day is measured by dividing the sum of lease
1-57 production during the four highest months of production in the
1-58 baseline period by the sum of the number of well-days, where a
1-59 well-day is one well producing for one day.
1-60 (7) "Qualified incremental production" means the
1-61 lease's monthly total production multiplied by the incremental
1-62 ratio.
1-63 (b) An operator of a qualifying lease is entitled to a 50
1-64 percent tax exemption on that lease's qualified incremental
2-1 production for five years provided that:
2-2 (1) the incremental production required to define a
2-3 qualifying lease occurred after September 1, 1997, and before
2-4 December 31, 1998;
2-5 (2) the operator of a qualifying lease applies to the
2-6 commission for a determination of a lease's incremental ratio
2-7 before February 11, 1999; and
2-8 (3) the operator provides to the comptroller a
2-9 commission-certified incremental ratio.
2-10 (c) If the comptroller's average taxable price of crude oil
2-11 reaches $25 per barrel, adjusted to 1997 dollars, for three
2-12 consecutive months, the tax credit under this section shall be
2-13 suspended until the price drops below $25 per barrel, adjusted to
2-14 1997 dollars, for three consecutive months.
2-15 (d) If the tax is paid at the full rate provided by Section
2-16 201.052(a) or (b) or Section 202.052(a) or (b) before the
2-17 comptroller approves an application for an exemption provided in
2-18 this chapter, the operator is entitled to a credit against taxes
2-19 imposed by this chapter in an amount equal to 50 percent of the tax
2-20 paid on the incremental production. To receive the credit, the
2-21 operator must apply to the comptroller for the credit not later
2-22 than the first anniversary after the date the commission certifies
2-23 the incremental ratio for a qualifying lease.
2-24 (e) The commission may enact rules necessary to administer
2-25 the provisions of this section.
2-26 SECTION 3. This Act takes effect September 1, 1997.
2-27 SECTION 4. The importance of this legislation and the
2-28 crowded condition of the calendars in both houses create an
2-29 emergency and an imperative public necessity that the
2-30 constitutional rule requiring bills to be read on three several
2-31 days in each house be suspended, and this rule is hereby suspended.
2-32 * * * * *