By: Armbrister S.B. No. 1385
A BILL TO BE ENTITLED
relating to encouraging production from gas and oil wells.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 201.058(a), Tax Code, is amended to read
(a) The exemptions and credits described by Sections
202.056, 202.057, 202.058, and 202.059 apply to the taxes imposed
by this chapter as authorized by and subject to the certifications
and approvals required by those sections.
SECTION 2. Section 202.001, Tax Code, is amended by adding
Subdivisions (1-a)-(1-c) to read as follows:
(1-a) "Commercial volumes" means oil or natural gas
produced by a well and properly reported to the commission as sold
in cumulative or monthly volumes in excess of the reserve or monthly
rate minimums established by the commission by rule for wells
producing from a similar depth.
(1-b) "Commission" means the Railroad Commission of
(1-c) "Field" means a geologic reservoir, portion of a
reservoir, or series of vertically separated reservoirs that:
(A) contains hydrocarbons; and
(B) the commission designates as a discrete
source of supply for purposes of regulating the exploration,
development, and production of oil and gas resources.
SECTION 3. Subchapter B, Chapter 202, Tax Code, is amended
by adding Section 202.058 to read as follows:
Sec. 202.058. TAX CREDIT FOR NEW EXPLORATORY WELLS. (a) In
(1) "Lowest productive point in the well" means the
location of the lowest perforation, slot, or open hole in a new
exploratory well that is within the commission-designated
correlative interval for the field from which the well produces.
(2) "New exploratory well" means a well:
(A) permitted by the commission as an oil or gas
well after September 1, 2005;
(B) spudded before September 1, 2009; and
(C) drilled to:
(i) a bottomhole location that is at least
one mile from the bottomhole location of the nearest well that
produces, or has produced, from the same geologic interval in
commercial volumes; or
(ii) a horizon such that the lowest
productive point in the well is at least 1,000 feet below the
correlative interval of any field within one mile of the location of
the lowest productive point in the well.
(b) The producer is entitled to a credit on the taxes
imposed by this chapter and Chapter 201 in an amount provided by
(c) The amount of the credit is equal to $10,000 plus a
dollar amount that is equal to the quotient of the square of the
depth of the well divided by 1,000.
(d) A well that produces from the same field as a previously
approved new exploratory well may not be approved as a new
exploratory well if the bottomhole locations of the two wells are
less than one mile apart.
SECTION 4. Subchapter B, Chapter 202, Tax Code, is amended
by adding Section 202.060 to read as follows:
Sec. 202.060. TAX CREDIT FOR ENHANCED EFFICIENCY EQUIPMENT.
(a) In this section, "enhanced efficiency equipment" means
equipment used in the production of oil that reduces the energy used
to produce a barrel of fluid by 10 percent or more when compared to
commonly available alternative equipment. Equipment does not
qualify as enhanced efficiency equipment unless an institution of
higher education located in this state evaluated the equipment and
determined that the equipment does produce the required energy
(b) The taxpayer responsible for the payment of severance
taxes on the production from a well on which enhanced efficiency
equipment is installed and used is entitled to a credit in an amount
equal to 20 percent of the cost of the equipment, but not to exceed a
total credit of $2,000 per well. The taxpayer may carry any unused
credit forward until the credit is used.
SECTION 5. This Act takes effect September 1, 2005.