By: Brown, et al. S.B. No. 290 A BILL TO BE ENTITLED AN ACT 1-1 relating to a temporary exemption from the severance tax for oil 1-2 and gas produced from wells under certain market conditions. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subchapter B, Chapter 201, Tax Code, is amended 1-5 by adding Section 201.059 to read as follows: 1-6 Sec. 201.059. TEMPORARY EXEMPTION FOR GAS FROM CERTAIN WELLS 1-7 UNDER CERTAIN MARKET CONDITIONS. (a) In this section: 1-8 (1) "Commission" means the Railroad Commission of 1-9 Texas. 1-10 (2) "Mcf" means 1,000 cubic feet of gas as measured in 1-11 accordance with Section 91.052, Natural Resources Code. 1-12 (3) "Qualifying well" means a commission-designated 1-13 gas well whose production during the three-month period beginning 1-14 on October 1, 1998, and ending on December 31, 1998, is no more 1-15 than 90 Mcf per day, excluding gas flared pursuant to the rules of 1-16 the commission. For purposes of qualifying a gas well, production 1-17 per well per day is determined by computing the average daily 1-18 production from the well using the "P-2" monthly well production 1-19 report made to the commission. The commission shall certify to the 1-20 comptroller a list of qualifying wells. 1-21 (b) The comptroller shall certify the dates that the monthly 1-22 average closing price of gas is below $1.80 per MMBtu, as recorded 1-23 on the New York Mercantile Exchange (NYMEX), for three consecutive 1-24 months. The comptroller shall perform the first certification 2-1 determination under this subsection for the three-month period 2-2 beginning on November 1, 1998. 2-3 (c) Gas produced from a qualifying well or from a qualifying 2-4 lease under Section 202.060 on or after February 1, 1999, and 2-5 before August 1, 1999, is exempt from the severance tax imposed by 2-6 this chapter for each calendar month succeeding a three-month 2-7 period certified by the comptroller under Subsection (b). 2-8 (d) A person filing a report under this chapter must include 2-9 the amount of the gas purchased or produced during the period 2-10 covered by the report that is exempt under this section. 2-11 (e) If the tax is paid on gas exempt under this section at 2-12 the full rate provided by Section 201.052(a) or (b), the person 2-13 paying the tax is entitled to a credit against taxes imposed by 2-14 this chapter for the amount paid. To receive the credit, the 2-15 person must apply to the comptroller for the credit not later than 2-16 the expiration of the applicable period for filing a tax refund 2-17 under Section 111.104. 2-18 (f) This section expires on the earlier of September 1, 2-19 1999, or the last day of the month in which the total taxes 2-20 exempted under this section and Section 202.060 equal $45 million. 2-21 Beginning on March 1, 1999, the comptroller shall make a monthly 2-22 determination of the total taxes that have been exempted under this 2-23 section and Section 202.060. If the comptroller determines that 2-24 the total taxes exempted under this section and Section 202.060 2-25 will exceed $45 million, the comptroller shall certify the month in 2-26 which this will occur and shall prorate the amount of the exemption 3-1 for that month. 3-2 (g) The comptroller shall publish certifications under this 3-3 section in the Texas Register. 3-4 (h) The exemption from severance taxes provided by this 3-5 section does not exempt the gas subject to the exemption from any 3-6 other fees or taxes, including the fee imposed under Section 3-7 81.117, Natural Resources Code. 3-8 SECTION 2. Subchapter B, Chapter 202, Tax Code, is amended 3-9 by adding Section 202.060 to read as follows: 3-10 Sec. 202.060. TEMPORARY EXEMPTION FOR OIL FROM CERTAIN WELLS 3-11 UNDER CERTAIN MARKET CONDITIONS. (a) In this section: 3-12 (1) "Commission" means the Railroad Commission of 3-13 Texas. 3-14 (2) "Qualifying lease" means a commission-designated 3-15 oil lease whose production during the three-month period beginning 3-16 on October 1, 1998, and ending on December 31, 1998, is no more 3-17 than 15 barrels of oil per day per well. For purposes of 3-18 qualifying a lease, production per well per day is determined by 3-19 computing the average daily per well production from the lease 3-20 using the "P-1" monthly lease production report made to the 3-21 commission. For purposes of qualifying a lease, production per 3-22 well per day is measured by dividing the sum of lease production 3-23 during the three-month period by the sum of the number of 3-24 well-days, where a well-day is one well producing for one day. The 3-25 commission shall certify to the comptroller a list of qualifying 3-26 leases. 4-1 (b) The comptroller shall certify the dates that the monthly 4-2 average closing price of West Texas Intermediate crude oil is below 4-3 $15 per barrel, as recorded on the New York Mercantile Exchange 4-4 (NYMEX), for three consecutive months. The comptroller shall 4-5 perform the first certification determination under this subsection 4-6 for the three-month period beginning on November 1, 1998. 4-7 (c) Oil produced from a qualifying lease on or after 4-8 February 1, 1999, and before August 1, 1999, is exempt from the 4-9 severance tax imposed by this chapter for each calendar month 4-10 succeeding a three-month period certified by the comptroller under 4-11 Subsection (b). 4-12 (d) A person filing a report under this chapter must include 4-13 the number of barrels of oil purchased or produced during the 4-14 period covered by the report that are exempt under this section. 4-15 (e) If the tax is paid on a barrel of oil exempt under this 4-16 section at the full rate provided by Section 202.052(a) or (b), the 4-17 person paying the tax is entitled to a credit against taxes imposed 4-18 by this chapter for the amount paid. To receive the credit, the 4-19 person must apply to the comptroller for the credit not later than 4-20 the expiration of the applicable period for filing a tax refund 4-21 under Section 111.104. 4-22 (f) This section expires on the earlier of September 1, 4-23 1999, or the last day of the month in which the total taxes 4-24 exempted under this section and Section 201.059 equal $45 million. 4-25 Beginning on March 1, 1999, the comptroller shall make a monthly 4-26 determination of the total taxes that have been exempted under this 5-1 section and Section 201.059. If the comptroller determines that 5-2 the total taxes exempted under this section and Section 201.059 5-3 will exceed $45 million, the comptroller shall certify the month in 5-4 which this will occur and shall prorate the amount of the exemption 5-5 for that month. 5-6 (g) The comptroller shall publish certifications under this 5-7 section in the Texas Register. 5-8 (h) The exemption from severance taxes provided by this 5-9 section does not exempt the oil subject to the exemption from any 5-10 other fees or taxes, including the fee imposed under Section 5-11 81.116, Natural Resources Code. 5-12 SECTION 3. The importance of this legislation and the 5-13 crowded condition of the calendars in both houses create an 5-14 emergency and an imperative public necessity that the 5-15 constitutional rule requiring bills to be read on three several 5-16 days in each house be suspended, and this rule is hereby suspended, 5-17 and that this Act take effect and be in force from and after its 5-18 passage, and it is so enacted.