79R9745 CBH-F

By:  Armbrister                                                   S.B. No. 1385

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 as follows: (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 Texas. (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 this section: (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 Subsection (c). (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 reduction. (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.