HBA-ATS H.B. 1164 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1164 By: Hawley Ways & Means 4/8/1999 Introduced BACKGROUND AND PURPOSE Currently, state law requires the State of Texas to collect severance taxes for each barrel of oil and each Mcf (thousand cubic feet) of gas produced in the state. As the price for oil and gas declines, "stripper wells" that produce minimal amounts of oil or gas are often shut down, and once these wells are shut down it is often too expensive to commence operations again. Stripper wells produce nearly 30 percent of all oil in the state. H.B. 1164 sets forth a quarterly certification determination system that waives the severance tax imposed on certain oil and gas produced for two years after the completion of a well if either the monthly average closing price of gas is below $1.80 per MMBtu (Million Btu) or the monthly average closing price of oil is below $15 per barrel, as recorded on the New York Mercantile Exchange. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 202, Tax Code, by adding Section 202.060, as follows: Sec. 202.060. EXEMPTION FOR OIL FROM CERTAIN WELLS UNDER CERTAIN MARKET CONDITIONS. (a) Defines "commission," "qualifying lease," and "spudded." (b) Requires the comptroller of public accounts of the State of Texas (comptroller) to certify the dates that the monthly average closing daily price of West Texas Intermediate crude oil is below $15 per barrel, as recorded on the New York Mercantile Exchange (NYMEX) for three consecutive months. (c) Exempts from the severance tax imposed by Chapter 202 (Oil Production Tax) the oil produced from a well spudded (the initial penetration of the earth by the drill bit for an oil or gas well under proper permit from the Railroad Commission of Texas) during a three-month period certified by the comptroller under Subsection (b). Establishes the second anniversary after a well is completed as the date on which the exemption expires. (d) Exempts from the severance tax for each calendar month during a three-month period certified by the comptroller the oil produced from a qualifying lease. (e) Provides that a person filing a report under Chapter 202 must include the number of barrels of oil purchased or produced during the period covered by the report that are exempt under this section. (f) Entitles a person to a credit against taxes imposed by Chapter 202 for the amount paid if the tax is paid on a barrel of oil exempt under this section at the full rate provided by Section 202.052(a) or (b) (Rate of Tax). Provides that a person must apply to the comptroller for the credit not later than the expiration of the applicable period for filing a tax refund under Section 111.104 (Refunds) in order to receive the credit. (g) Provides that a person responsible for paying the tax must certify to the comptroller the month in which the well was spudded in order to qualify for an exemption under Subsection (c). SECTION 2. Amends Subchapter B, Chapter 201, Tax Code, by adding Section 201.059, as follows: Sec. 201.059. EXEMPTION FOR GAS FROM CERTAIN WELLS UNDER CERTAIN MARKET CONDITIONS. (a) Defines "commission," "MCF," "qualifying lease," and "spudded." (b) Requires the comptroller to certify the dates that the monthly average closing daily price of gas is below $1.80 per MMBtu as recorded on the NYMEX for three consecutive months. (c) Exempts from the severance tax imposed by Chapter 201 the gas produced from a well spudded during a three-month period certified by the comptroller under Subsection (b). Establishes the second anniversary after a well is completed as the date on which the exemption expires. (d) Exempts from the severance tax for each calendar month during a three-month period certified by the comptroller the gas produced from a qualifying lease. (e) Provides that a person filing a report under Chapter 201 must include the gas purchased or produced during the period covered by the report that is exempt under this section. (f) Entitles a person to a credit against taxes imposed by Chapter 201 for the amount paid if the tax is paid on gas exempt under this section at the full rate provided by Section 201.052(a) or (b). Provides that a person must apply to the comptroller for the credit not later than the expiration of the applicable period for filing a tax refund under Section 111.104 in order to receive the credit. (g) Provides that a person responsible for paying the tax must certify to the comptroller the month in which the well was spudded in order to qualify for an exemption under Subsection (c). SECTION 3. Effective date: September 1, 1999. Makes application of this Act prospective. SECTION 4. Emergency clause.