Amend CSHB 3732 as follows:                                                  
	(1)  Strike page 6, lines 1 and 2, and substitute the 
following:             
	SECTION 4.  Section 11.31, Tax Code, is amended by amending 
Subsection (b) and adding Subsections (k), (l), and (m) to read as 
follows:
	(2)  Insert the following on page 6 between lines 2 and 3:                     
	(b)  In this section, "facility, device, or method for the 
control of air, water, or land pollution" means land that is 
acquired after January 1, 1994, or any structure, building, 
installation, excavation, machinery, equipment, or device, and any 
attachment or addition to or reconstruction, replacement, or 
improvement of that property, that is used, constructed, acquired, 
or installed wholly or partly to meet or exceed rules or regulations 
adopted by any environmental protection agency of the United 
States, this state, or a political subdivision of this state for the 
prevention, monitoring, control, or reduction of air, water, or 
land pollution.  Whether or not carbon dioxide is considered a 
pollutant, the term includes property that is used, constructed, 
acquired, or installed wholly or partly to capture carbon dioxide 
from an anthropogenic source that is used in an enhanced recovery 
project for which a producer of oil receives a severance tax 
exemption under Section 202.0545, or that is geologically 
sequestered.  This section does not apply to a motor vehicle.
	(3)  Insert the following appropriately numbered SECTIONS to 
the bill:       
	SECTION ____.  Subchapter B, Chapter 202, Tax Code, is 
amended by adding Section 202.0545 to read as follows:
	Sec. 202.0545.  TAX EXEMPTION FOR ENHANCED RECOVERY PROJECTS 
USING ANTHROPOGENIC CARBON DIOXIDE.  (a)  Subject to the 
limitations provided by this section, the producer of oil recovered 
through an enhanced oil recovery project that qualifies under 
Section 202.054 for the recovered oil tax rate provided by Section 
202.052(b) is entitled to an additional 50 percent reduction in 
that tax rate if in the recovery of the oil the enhanced oil 
recovery project uses carbon dioxide that:
		(1)  is captured from an anthropogenic source;                         
		(2)  would otherwise be released into the atmosphere as 
industrial emission;
		(3)  is measurable at the source of capture; and                       
		(4)  is sequestered in one or more geological 
formations following the enhanced oil recovery process;
	(b)  In the event that a portion of the carbon dioxide used in 
the enhanced oil recovery project is anthropogenic carbon dioxide 
that satisfies the criteria of Subsection (a) and a portion of the 
carbon dioxide used in the project fails to satisfy the criteria of 
Subsection (a) because it is not anthropogenic, the tax reduction 
provided by Subsection (a) shall be reduced to reflect the 
proportion of the carbon dioxide used in the project that satisfies 
the criteria of Subsection (a).
	(c)  To qualify for the tax rate reduction under this 
section, the operator must apply to the comptroller for the 
reduction and include with the application any information and 
documentation that the comptroller may require.
	(d)  To qualify for the tax rate reduction under this 
Section, the operator must apply for a certification from the 
agency or agencies responsible, under the federal Safe Drinking 
Water Act, for the regulation of underground injection of the 
carbon dioxide to be sequestered pursuant to Subsection (a)(4).  
The agency or agencies must certify, based on substantial evidence, 
that there is a reasonable expectation that:
		(1)  the operator's planned sequestration program will 
assure that at least 99% of the carbon dioxide sequestered as 
required by Subsection (a)(4) will remain sequestered for at least 
1000 years; and
		(2)  the operator's planned sequestration program will 
include appropriately designed monitoring and verification 
measures that will be employed for a period of time sufficient to 
demonstrate whether or not the sequestration program is performing 
as expected.
	(e)  The tax rate reduction shall not apply if the operator's 
sequestration program or the operator's monitoring and 
verification measures differs substantially from the planned 
program as described in Subsection (d), and the operator shall 
refund the difference between the tax paid on oil produced pursuant 
to this Section and the tax that would have applied in the absence 
of this Section.
	(f)  The comptroller shall approve the application if the 
operator submits the certification or certifications required by 
Subsection (d) and if the comptroller determines that the oil is 
otherwise eligible under this section.
	(g)  If, before the comptroller approves an application for 
the tax rate reduction under this section, the tax imposed by this 
chapter is paid at the rate provided by Section 202.052(a) or (b) on 
oil that qualifies under this section, the producer or producers of 
the oil are entitled to a credit against taxes imposed by this 
chapter in an amount equal to the difference between the tax paid on 
the oil and the tax due on the oil after the rate reduction under 
this section is applied.  The credit is allowed to each producer 
according to the producer's proportionate share in the oil.  To 
receive a credit, one or more of the producers of the oil must apply 
to the comptroller for the credit not later than the first 
anniversary of the date the oil is produced.
	(h)  The comptroller may enact rules and establish 
procedures to implement and administer this section.
	(i)  The Railroad Commission may enact rules and establish 
procedures to implement and administer this section.
	(j)  The Texas Commission on Environmental Quality may enact 
rules and establish procedures to implement and administer this 
section.
	SECTION ____. The amendment made by this Act to Section 
11.31(b), Tax Code, takes effect January 1, 2008.