79R16156 SMH-F
By: West H.B. No. 2980
Substitute the following for H.B. No. 2980:
By: Farabee C.S.H.B. No. 2980
A BILL TO BE ENTITLED
AN ACT
relating to incentives for operators to assume regulatory
responsibility for orphaned oil or gas wells; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 81.116(d), Natural Resources Code, is
amended to read as follows:
(d) The comptroller shall suspend collection of the fee in
the manner provided by Section 91.111 [of this code]. The
exemptions and reductions set out in Sections 202.052, 202.054,
202.056, 202.057, [and] 202.059, and 202.060, Tax Code, do not
affect the fee imposed by this section.
SECTION 2. Section 89.044, Natural Resources Code, is
amended to read as follows:
Sec. 89.044. RIGHT TO ENTER ON LAND. (a) The commission or
its employees or agents, the operator, or the nonoperator, on
proper identification, may enter the land of another for the
purpose of plugging or replugging a well that has not been properly
plugged.
(b) A prospective operator who has been authorized under
Section 89.047 to conduct a surface inspection of a well, on proper
identification, may enter the land of another for the sole purpose
of conducting the inspection.
SECTION 3. Subchapter C, Chapter 89, Natural Resources
Code, is amended by adding Section 89.047 to read as follows:
Sec. 89.047. ORPHANED WELL REDUCTION PROGRAM. (a) In this
section:
(1) "Depth of the well" means the vertical depth of a
well as measured in linear feet from the surface to the lowest
perforation of the casing of the well that is within the
commission-designated correlative interval for the field for which
the well is issued a permit.
(2) "Operator in good standing" means an operator who:
(A) has a commission-approved organization
report;
(B) is the designated operator of at least one
well within the jurisdiction of the commission;
(C) has filed with the commission under Section
91.104 a bond, letter of credit, or cash deposit in an amount
sufficient to qualify to operate one or more additional wells; and
(D) is not the subject of a commission or court
order regarding a violation of a commission rule with which the
operator has not complied or a complaint that has been docketed by
the commission alleging a violation of a commission rule.
(3) "Orphaned well" means a well:
(A) for which the commission has issued a permit;
(B) for which production of oil or gas or another
activity under the jurisdiction of the commission has not been
reported to the commission for the preceding 12 months; and
(C) whose operator has not had a
commission-approved organization report for the preceding four
months.
(4) "Producing well" means a well classified by the
commission as an oil or gas well in accordance with commission
rules.
(5) "Service well" means a well for which the
commission has issued a permit that is not a producing well. The
term includes an injection, disposal, or brine mining well.
(b) A person who is considering assumption of operatorship
and regulatory responsibility for an orphaned well may nominate the
well under consideration by filing a request on a form prescribed by
the commission notifying the commission that the person seeks
authority to conduct a surface inspection of the well to determine
whether the person desires to be designated by the commission as the
operator of the well.
(c) If the person is an operator in good standing and the
well is not already subject to a nomination, the commission shall
accept the nomination and issue a written confirmation to the
person of the person's authority to conduct a surface inspection of
the nominated well for a stated period not to exceed 30 days.
(d) A person to whom a confirmation is issued under
Subsection (c) may conduct a surface inspection of the well. The
person must deliver written notice to the owner of record of the
surface estate and any occupant of the tract on which the well is
located at least three days before the date of the inspection. The
notice must:
(1) identify the orphaned well;
(2) state the name, address, and telephone number of
the person;
(3) state the date the person intends to conduct the
surface inspection;
(4) state the name of at least one representative of
the person who will participate in the surface inspection; and
(5) state that the person intends to inspect the
orphaned well in accordance with this section for the purpose of
assessing the current status and viability of the well.
(e) In conducting a surface inspection of the orphaned well,
the person may visually inspect the well and all related equipment,
tanks, and other facilities and may conduct noninvasive testing
such as using a gauge to determine the pressure present at the
wellhead but may not produce oil or gas from the well, reenter the
well, pull tubing from or perform any other type of downhole work on
the well, conduct a salvage operation on the well, or remove any
tangible item from the wellsite.
(f) If the person files with the commission a factually
supported claim based on a recognized legal theory to a continuing
possessory right in the mineral estate accessed by the well, such as
evidence of a current oil and gas lease or a recorded deed conveying
a fee interest in the mineral estate, the commission shall
designate the person as the operator of the well. A person who is
designated as the operator of an orphaned well on or after January
1, 2006, and not later than December 31, 2007, is entitled to
receive:
(1) a nontransferable exemption from severance taxes
for all future production from the well as provided by Section
202.060, Tax Code; and
(2) a payment from the commission in an amount equal to
the depth of the well multiplied by 50 cents for each foot of well
depth if, not later than the third anniversary of the date the
commission designates the person as the operator of the well, the
person brings the well back into continuous active operation or
plugs the well in accordance with commission rules.
(g) A well is considered to be in continuous active
operation for purposes of Subsection (f)(2) if:
(1) the well is a producing well and the well has
produced at least 10 barrels of oil or 100 mcf of gas per month for
at least three consecutive months as shown in the records of the
commission and as authorized by a permit issued by the commission;
or
(2) the well is a service well and the well has been
used for the disposal or injection of oil and gas wastes or another
purpose related to the production of oil or gas for at least three
consecutive months as shown in the records of the commission and as
authorized by a permit issued by the commission.
(h) The commission shall make payments to operators under
Subsection (f)(2) annually in the same order the commission
determines the operators to be entitled to the payments. The
aggregate amount of payments in a state fiscal year under that
subsection may not exceed $500,000. An operator may not receive:
(1) more than one payment under that subsection for
the same well; or
(2) payments under that subsection in a state fiscal
year in an amount that exceeds the amount of the bond, letter of
credit, or cash deposit the operator has filed with the commission
under Section 91.104.
SECTION 4. Section 91.112(a), Natural Resources Code, is
amended to read as follows:
(a) Money in the fund may be used by the commission or its
employees or agents for:
(1) conducting a site investigation or environmental
assessment to determine:
(A) the nature and extent of contamination caused
by oil and gas wastes or other substances or materials regulated by
the commission under Section 91.101; and
(B) the measures that should be taken to control
or clean up the wastes, substances, or materials described in
Paragraph (A);
(2) controlling or cleaning up oil and gas wastes or
other substances or materials regulated by the commission under
Section 91.101 that are causing or are likely to cause the pollution
of surface or subsurface water, consistent with Section 91.113;
(3) plugging abandoned wells and administering or
enforcing permits, orders, and rules relating to the commission's
authority to prevent pollution under this chapter, Chapter 89, or
any other law administered or enforced by the commission under
Title 3;
(4) implementing Subchapter N and enforcing rules,
orders, and permits adopted or issued under that subchapter;
(5) implementing the voluntary cleanup program under
Subchapter O; [and]
(6) preparing the report required under Subsection
(b); and
(7) making payments to eligible operators under
Section 89.047.
SECTION 5. Section 201.053, Tax Code, is amended to read as
follows:
Sec. 201.053. GAS NOT TAXED. The tax imposed by this
chapter does not apply to gas:
(1) injected into the earth in this state, unless sold
for that purpose;
(2) produced from oil wells with oil and lawfully
vented or flared;
(3) used for lifting oil, unless sold for that
purpose; or
(4) produced in this state from a well that qualifies
under Section 202.056 or 202.060.
SECTION 6. Section 201.058(a), Tax Code, is amended to read
as follows:
(a) The exemptions described by Sections 202.056, 202.057,
[and] 202.059, and 202.060 apply to the taxes imposed by this
chapter as authorized by and subject to the certifications and
approvals required by those sections.
SECTION 7. Section 202.052(c), Tax Code, is amended to read
as follows:
(c) The exemptions described by Sections 202.056, [and]
202.059, and 202.060 apply to oil produced in this state from a well
that qualifies under Section 202.056, [or] 202.059, or 202.060,
subject to the certifications and approvals required by those
sections.
SECTION 8. Subchapter B, Chapter 202, Tax Code, is amended
by adding Section 202.060 to read as follows:
Sec. 202.060. EXEMPTION FOR OIL AND GAS FROM REACTIVATED
ORPHANED WELLS. (a) In this section:
(1) "Commission" means the Railroad Commission of
Texas.
(2) "Orphaned well" has the meaning assigned by
Section 89.047, Natural Resources Code.
(b) The commission shall issue a certificate to a person who
is designated by the commission under Section 89.047, Natural
Resources Code, as the operator of an orphaned well. The
certificate must identify the operator to whom and the well for
which the certificate is issued.
(c) Hydrocarbons produced from the well identified in the
certificate qualify for a severance tax exemption.
(d) The commission shall adopt all rules necessary to
administer this section.
(e) To qualify for the tax exemption provided by this
section, the person responsible for paying the tax must apply to the
comptroller. The application must include a copy of the
certificate issued by the commission. The comptroller shall
approve the application if the person demonstrates that the
hydrocarbon production is eligible for a tax exemption. The
comptroller may require a person applying for the tax exemption to
provide any relevant information necessary to administer this
section. The comptroller may establish procedures to comply with
this section.
(f) The exemption takes effect on the first day of the month
following the month in which the comptroller approves the
application.
(g) If the person to whom the certificate is issued ceases
to be the operator of the well as shown by the records of the
commission, the commission shall notify the comptroller. The
exemption expires on the date the notice is received.
(h) A person who makes or subscribes an application, report,
or other document and submits it to the commission to form the basis
for an application for a tax exemption under this section, knowing
that the application, report, or other document is untrue in a
material fact, is subject to the penalties imposed by Chapters 85
and 91, Natural Resources Code.
(i) A person is liable to the state for a civil penalty if
the person applies or attempts to apply the tax exemption
authorized by this section for a well after the person to whom the
certificate for the well was issued ceases to be the operator of the
well as shown by the records of the commission. The amount of the
penalty may not exceed the sum of:
(1) $10,000; and
(2) the difference between the amount of taxes paid or
attempted to be paid and the amount of taxes due.
(j) The attorney general may recover a penalty under
Subsection (i) in a suit brought on behalf of the state. Venue for
the suit is in Travis County.
SECTION 9. This Act takes effect January 1, 2006.