79(R) HB 1202 - House Committee Report version


                                                                                
79R15486 CBH-F


By:  West                                                         H.B. No. 1202

Substitute the following for H.B. No. 1202:                                   

By:  Gonzalez Toureilles                                      C.S.H.B. No. 1202



A BILL TO BE ENTITLED

AN ACT

relating to severance tax credits for continued production from 
certain low-producing gas wells and oil leases.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subchapter B, Chapter 201, Tax Code, is amended 
by adding Section 201.059 to read as follows:
	Sec. 201.059.  CREDITS FOR QUALIFYING LOW-PRODUCING WELLS.  
(a)  In this section:
		(1)  "Commission" means the Railroad Commission of 
Texas.            
		(2)  "Mcf" means 1,000 cubic feet of gas as measured in 
accordance with Section 91.052, Natural Resources Code.
		(3)  "Qualifying low-producing well" means a 
commission-designated gas well whose production during a 
three-month period is no more than 90 mcf per day, excluding gas 
flared pursuant to the rules of the commission.  For purposes of 
qualifying a gas well, production per well per day is determined by 
computing the average daily production from the well using the 
"P-2" monthly well production report made to the commission.  The 
commission shall certify to the comptroller a list of qualifying 
wells.
	(b)  Each month, the comptroller shall certify the average 
taxable price of gas, adjusted to 2005 dollars, during the previous 
three months based on various price indices available to producers, 
including prices reported by Henry Hub, Houston Ship Channel, 
Mississippi Barge Transport, New York Mercantile Exchange, or other 
spot prices, as applicable.  The comptroller shall publish 
certifications under this subsection in the Texas Register.
	(c)  An operator of a qualifying low-producing well is 
entitled to a 25 percent credit on the tax otherwise due on gas 
produced and saved from that well during a month if the average 
taxable price of gas certified by the comptroller under Subsection 
(b) for the previous three-month period is more than $3 per mcf but 
not more than $3.50 per mcf.
	(d)  An operator of a qualifying low-producing well is 
entitled to a 50 percent credit on the tax otherwise due on gas 
produced and saved from that well during a month if the average 
taxable price of gas certified by the comptroller under Subsection 
(b) for the previous three-month period is more than $2.50 per mcf 
but not more than $3 per mcf.
	(e)  An operator of a qualifying low-producing well is 
entitled to a 100 percent credit on the tax otherwise due on gas 
produced and saved from that well during a month if the average 
taxable price of gas certified by the comptroller under Subsection 
(b) for the previous three-month period is not more than $2.50 per 
mcf.
	(f)  If the tax is paid on gas at the full rate provided by 
Section 201.052, the person paying the tax is entitled to a credit 
against taxes imposed by this chapter or Chapter 202 on the amount 
overpaid.  To receive the credit, the 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.
	SECTION 2.  Subchapter B, Chapter 202, Tax Code, is amended 
by adding Section 202.058 to read as follows:
	Sec. 202.058.  CREDITS FOR QUALIFYING LOW-PRODUCING OIL 
LEASES.  (a)  In this section:
		(1)  "Commission" means the Railroad Commission of 
Texas.            
		(2)  "Qualifying low-producing oil lease" means a well 
classified as an oil well that is part of a lease whose production 
during a 90-day period is less than:
			(A)  15 barrels of oil per day of production; or                      
			(B)  five percent recoverable oil per barrel of 
produced water.     
	(b)  For purposes of qualifying a lease, production per well 
per day is determined by computing the average daily per well 
production from the lease using the "P-1" monthly lease production 
report made to the commission.  For purposes of qualifying a lease, 
production per well per day is measured by dividing the sum of lease 
production during the three-month period by the sum of the number of 
well-days, where a well-day is one well producing for one day.  The 
commission shall certify to the comptroller a list of qualifying 
leases.  The operator of a lease that is eligible for a credit under 
this section only on the basis of Subsection (a)(2)(B) must pay to 
the comptroller a filing fee of $100 before the comptroller may 
authorize the credit.
	(c)  Each month, the comptroller shall certify the average 
taxable price of oil, adjusted to 2005 dollars, during the previous 
three months based on various price indices available to producers, 
including the reported Texas Panhandle Spot Price, West Texas 
Intermediate Crude Spot Price, New York Mercantile Exchange, or 
other spot prices, as applicable.  The comptroller shall publish 
certifications under this subsection in the Texas Register.
	(d)  An operator of a qualifying low-producing lease is 
entitled to a 25 percent credit on the tax otherwise due on oil 
produced from that lease during a month if the average taxable price 
of oil certified by the comptroller under Subsection (c) for the 
previous three-month period is more than $25 per barrel but not more 
than $30 per barrel.
	(e)  An operator of a qualifying low-producing lease is 
entitled to a 50 percent credit on the tax otherwise due on oil 
produced from that lease during a month if the average taxable price 
of oil certified by the comptroller under Subsection (c) for the 
previous three-month period is more than $22 per barrel but not more 
than $25 per barrel.
	(f)  An operator of a qualifying low-producing lease is 
entitled to a 100 percent credit on the tax otherwise due on oil 
produced from that lease during a month if the average taxable price 
of oil certified by the comptroller under Subsection (c) for the 
previous three-month period is not more than $22 per barrel.
	(g)  If the tax is paid on oil at the full rate provided by 
Section 202.052, the person paying the tax is entitled to a credit 
against taxes imposed by this chapter or Chapter 201 on the amount 
overpaid.  To receive the credit, the 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.
	SECTION 3.  (a)  This Act applies to gas and oil produced on 
or after the effective date of this Act.  Gas and oil produced 
before the effective date of this Act are governed by the law in 
effect on the date the gas and oil were produced, and that law is 
continued in effect for that purpose.
	(b)  As soon as practicable after the effective date of this 
Act, the comptroller shall perform the initial certification 
determination required by Sections 201.059 and 202.058, Tax Code, 
as added by this Act.  The initial certification determination must 
cover the three-month period beginning on June 1, 2005.
	(c)  The change in law made by this Act does not affect tax 
liability accruing before the effective date of this Act.  That 
liability continues in effect as if this Act had not been enacted, 
and the former law is continued in effect for the collection of tax 
due and for civil and criminal enforcement of the liability for 
those taxes.
	SECTION 4.  This Act takes effect September 1, 2005.