1-1 By: Brown, et al. S.B. No. 290 1-2 (In the Senate - Filed January 27, 1999; February 1, 1999, 1-3 read first time and referred to Committee on Finance; 1-4 February 4, 1999, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 9, Nays 0; 1-6 February 4, 1999, sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 290 By: Fraser 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to a temporary exemption from the severance tax for oil 1-11 and gas produced from wells under certain market conditions. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Subchapter B, Chapter 201, Tax Code, is amended 1-14 by adding Section 201.059 to read as follows: 1-15 Sec. 201.059. TEMPORARY EXEMPTION FOR GAS FROM CERTAIN WELLS 1-16 UNDER CERTAIN MARKET CONDITIONS. (a) In this section: 1-17 (1) "Commission" means the Railroad Commission of 1-18 Texas. 1-19 (2) "Mcf" means 1,000 cubic feet of gas as measured in 1-20 accordance with Section 91.052, Natural Resources Code. 1-21 (3) "Qualifying well" means a commission-designated 1-22 gas well whose production during the three-month period beginning 1-23 on October 1, 1998, and ending on December 31, 1998, is no more 1-24 than 90 Mcf per day, excluding gas flared pursuant to the rules of 1-25 the commission. For purposes of qualifying a gas well, production 1-26 per well per day is determined by computing the average daily 1-27 production from the well using the "P-2" monthly well production 1-28 report made to the commission. The commission shall certify to the 1-29 comptroller a list of qualifying wells. 1-30 (b) The comptroller shall certify the dates that the monthly 1-31 average closing price of gas is below $1.80 per MMBtu, as recorded 1-32 on the New York Mercantile Exchange (NYMEX), for three consecutive 1-33 months. The comptroller shall perform the first certification 1-34 determination under this subsection for the three-month period 1-35 beginning on November 1, 1998. 1-36 (c) Gas produced from a qualifying well or from a qualifying 1-37 lease under Section 202.060 on or after February 1, 1999, and 1-38 before August 1, 1999, is exempt from the severance tax imposed by 1-39 this chapter for each calendar month succeeding a three-month 1-40 period certified by the comptroller under Subsection (b). 1-41 (d) A person filing a report under this chapter must include 1-42 the amount of the gas purchased or produced during the period 1-43 covered by the report that is exempt under this section. 1-44 (e) If the tax is paid on gas exempt under this section at 1-45 the full rate provided by Section 201.052(a) or (b), the person 1-46 paying the tax is entitled to a credit against taxes imposed by 1-47 this chapter for the amount paid. To receive the credit, the 1-48 person must apply to the comptroller for the credit not later than 1-49 the expiration of the applicable period for filing a tax refund 1-50 under Section 111.104. 1-51 (f) This section expires on the earlier of September 1, 1-52 1999, or the last day of the month in which the total taxes 1-53 exempted under this section and Section 202.060 equal $45 million. 1-54 Beginning on March 1, 1999, the comptroller shall make a monthly 1-55 determination of the total taxes that have been exempted under this 1-56 section and Section 202.060. If the comptroller determines that 1-57 the total taxes exempted under this section and Section 202.060 1-58 will exceed $45 million, the comptroller shall certify the month in 1-59 which this will occur and shall prorate the amount of the exemption 1-60 for that month. 1-61 (g) The comptroller shall publish certifications under this 1-62 section in the Texas Register. 1-63 (h) The exemption from severance taxes provided by this 1-64 section does not exempt the gas subject to the exemption from any 2-1 other fees or taxes, including the fee imposed under Section 2-2 81.117, Natural Resources Code. 2-3 SECTION 2. Subchapter B, Chapter 202, Tax Code, is amended 2-4 by adding Section 202.060 to read as follows: 2-5 Sec. 202.060. TEMPORARY EXEMPTION FOR OIL FROM CERTAIN WELLS 2-6 UNDER CERTAIN MARKET CONDITIONS. (a) In this section: 2-7 (1) "Commission" means the Railroad Commission of 2-8 Texas. 2-9 (2) "Qualifying lease" means a commission-designated 2-10 oil lease whose production during the three-month period beginning 2-11 on October 1, 1998, and ending on December 31, 1998, is no more 2-12 than 15 barrels of oil per day per well. For purposes of 2-13 qualifying a lease, production per well per day is determined by 2-14 computing the average daily per well production from the lease 2-15 using the "P-1" monthly lease production report made to the 2-16 commission. For purposes of qualifying a lease, production per 2-17 well per day is measured by dividing the sum of lease production 2-18 during the three-month period by the sum of the number of 2-19 well-days, where a well-day is one well producing for one day. The 2-20 commission shall certify to the comptroller a list of qualifying 2-21 leases. 2-22 (b) The comptroller shall certify the dates that the monthly 2-23 average closing price of West Texas Intermediate crude oil is below 2-24 $15 per barrel, as recorded on the New York Mercantile Exchange 2-25 (NYMEX), for three consecutive months. The comptroller shall 2-26 perform the first certification determination under this subsection 2-27 for the three-month period beginning on November 1, 1998. 2-28 (c) Oil produced from a qualifying lease on or after 2-29 February 1, 1999, and before August 1, 1999, is exempt from the 2-30 severance tax imposed by this chapter for each calendar month 2-31 succeeding a three-month period certified by the comptroller under 2-32 Subsection (b). 2-33 (d) A person filing a report under this chapter must include 2-34 the number of barrels of oil purchased or produced during the 2-35 period covered by the report that are exempt under this section. 2-36 (e) If the tax is paid on a barrel of oil exempt under this 2-37 section at the full rate provided by Section 202.052(a) or (b), the 2-38 person paying the tax is entitled to a credit against taxes imposed 2-39 by this chapter for the amount paid. To receive the credit, the 2-40 person must apply to the comptroller for the credit not later than 2-41 the expiration of the applicable period for filing a tax refund 2-42 under Section 111.104. 2-43 (f) This section expires on the earlier of September 1, 2-44 1999, or the last day of the month in which the total taxes 2-45 exempted under this section and Section 201.059 equal $45 million. 2-46 Beginning on March 1, 1999, the comptroller shall make a monthly 2-47 determination of the total taxes that have been exempted under this 2-48 section and Section 201.059. If the comptroller determines that 2-49 the total taxes exempted under this section and Section 201.059 2-50 will exceed $45 million, the comptroller shall certify the month in 2-51 which this will occur and shall prorate the amount of the exemption 2-52 for that month. 2-53 (g) The comptroller shall publish certifications under this 2-54 section in the Texas Register. 2-55 (h) The exemption from severance taxes provided by this 2-56 section does not exempt the oil subject to the exemption from any 2-57 other fees or taxes, including the fee imposed under Section 2-58 81.116, Natural Resources Code. 2-59 SECTION 3. The importance of this legislation and the 2-60 crowded condition of the calendars in both houses create an 2-61 emergency and an imperative public necessity that the 2-62 constitutional rule requiring bills to be read on three several 2-63 days in each house be suspended, and this rule is hereby suspended, 2-64 and that this Act take effect and be in force from and after its 2-65 passage, and it is so enacted. 2-66 * * * * *