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SECTION 1. Section 201.057,
Tax Code, is amended by amending subsections (a), (c), (e) through (g), and
(i), and adding subsection (g-1) to read as follows:
(a) In this section:
(1) "Commission"
means the Railroad Commission of Texas.
(2) "High-cost gas"
means[:
[(A)] high-cost
natural gas as described by Section 107, Natural Gas Policy Act of 1978 (15
U.S.C. Section 3317), as that section exists on January 1, 1989, without
regard to whether that section is in effect or whether a determination has
been made that the gas is high-cost natural gas for purposes of that Act[;
or
[(B) all gas produced from
oil wells or gas wells within a commission approved co-production project].
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SECTION 1. Section
201.057(a)(2), Tax Code, is amended to read as follows:
(2) "High-cost gas"
means[:
[(A)] high-cost
natural gas as described by Section 107, Natural Gas Policy Act of 1978 (15
U.S.C. Section 3317), as that section existed [exists] on
January 1, 1989, without regard to whether that section is in effect or
whether a determination has been made that the gas is high-cost natural gas
for purposes of that Act[; or
[(B) all gas produced from
oil wells or gas wells within a commission approved co-production project].
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(c) High-cost gas as defined in Subsection (a)(2) [(a)(2)[(A)]
produced from a well that is spudded or completed after August 31, 1996, is
entitled to a reduction of the tax imposed by this chapter for the first
120 consecutive calendar months beginning on the first day of production,
or until the cumulative value of the tax reduction equals 50 percent of the
drilling and completion costs incurred for the well, whichever occurs
first. The amount of tax reduction shall be computed by subtracting from
the tax rate imposed by Section 201.052 the product of that tax rate times
the ratio of drilling and completion costs incurred for the well to twice
the median drilling and completion costs for high-cost wells as defined in Subsection (a)(2) [(a)(2)[(A)]
spudded or completed during the previous state fiscal year, except that the
effective rate of tax may not be reduced below zero.
(e) The operator of a
proposed or existing gas well, including a gas well that has not been
completed[, or the operator of any proposed or existing oil or gas well
within a commission approved co-production project,] may apply to the
commission for certification that the well produces or will produce
high-cost gas. Such application [, if seeking certification as high-cost
gas according to Subsection (a)(2)(A),]
may be made at any time after
the first day of production. The application may be made but is not
required to be made concurrently with a request for a determination that
gas produced from the well is high-cost natural gas for purposes of the
Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) [or with
a request for commission approval of a co-production project]. The
commission may require an applicant to provide the commission with any
relevant information required to administer this section. For purposes of
this section, a determination that gas is high-cost natural gas according to Subsection (a)(2) [(a)(2)(A)
or a determination that gas is produced from within a commission approved
co-production project] is a certification that the gas is high-cost gas
for purposes of this section, and in that event additional certification is
not required to qualify for the [exemption or] tax reduction
provided by this section.
(f) To qualify for the [exemption
or] tax reduction provided by this section, the person responsible for
paying the tax must apply to the comptroller. The application must contain
the certification of the commission that the well produces high-cost gas
and[, if the application is for a well spudded or completed after
September 1, 1995,] must contain a report of drilling and completion
costs incurred for each well on a form and in the detail as determined by
the comptroller. Drilling and completion costs for a recompletion shall
only include current and contemporaneous costs associated with the
recompletion. Notwithstanding any other provision of this section, to
obtain the maximum [tax exemption or] tax deduction, an application to the comptroller for
certification according to Subsection (a)(2) [(a)(2)[(A)]
must be filed with the comptroller at the later of the 180th day after the
date of first production or the 45th day after the date of approval by the
commission. If the application is not filed by the applicable deadline, the
[tax exemption or] tax deduction
is reduced by 10 percent for the period beginning on the 180th day after
the first day of production and ending on the date on which the application
is filed with the comptroller. [An application to the comptroller for
certification according to Subsection (a)(2)(B) may not be filed before
January 1, 1990, or after December 31, 1998.] The comptroller shall
approve the application of a person who demonstrates that the gas is
eligible for the [exemption or] tax reduction. The comptroller may
require a person applying for the [exemption or] tax reduction to
provide any relevant information in the person's monthly report that the
comptroller considers necessary to administer this section. The commission
shall notify the comptroller in writing immediately if it determines that a
[an oil or gas] well previously certified as producing high-cost gas
does not produce high-cost gas or if it takes any action or discovers any
information that affects the eligibility of gas for an exemption or tax reduction under this section.
(g) As soon as practicable
after March 1 of each year, the comptroller shall determine [from
reports containing drilling and completion cost data as required on
applications to the comptroller under Subsection (f),] the median
drilling and completion cost for all high-cost wells as defined in Subsection (a)(2)
[(a)(2)[(A)] for which an application for the
[exemption or] reduced tax was made during the previous state
fiscal year. In making its determination, the comptroller shall use the
drilling and completion cost data required under Subsection (f). The [Those]
median drilling and completion cost [costs] shall be fixed
as of the date of the comptroller's determination and shall be used to
compute the reduced tax under Subsection (c).
(g-1) The report of
drilling and completion costs required by subsection (f) may not be amended
after March 1 of the year following the state fiscal year in which the
application required by Subsection (f)
was made.
(i) If, before the commission
certifies that a well produces high-cost gas or before the comptroller
approves an application for the [an exemption or] tax
reduction under this section, the tax imposed by this chapter is paid on
high-cost gas that otherwise qualifies for the [exemption or] tax
reduction provided by this section, the person who remitted the tax shall
be [producer or producers of the gas are] entitled to a refundcredit
against other taxes imposed by this chapter] in an amount equal to the
difference between the amount of the tax paid and the amount of tax
that would have been paid on the high-cost gas if it had received the [on
the gas that otherwise qualified for the exemption or] tax reduction as
provided under this section. No refund shall
be due under this subsection unless the comptroller approves an application
for an exemption or tax reduction under this section [on or
after the first day of the next month after the month in which the
application for certification under this section was filed with the
commission]. The [If the application for certification is submitted
to the commission after January 1, 2004, the] total allowable refund
[allowable credit] for taxes paid for reporting periods before the
date the application is filed may not exceed the total tax paid on the gas
that otherwise qualified for the [exemption or] tax reduction and
that was produced during the 24 consecutive calendar months immediately
preceding the month in which the application for certification under this
section was filed with the commission. [The credit is allocated to each
producer according to the producer's proportionate share in the gas.]
To receive a refund [a credit], the person entitled to the
refund [one or more of the producers] must apply to the
comptroller for the refund [credit] not later than the first
anniversary after the date the comptroller approves the application for a
[an exemption or] tax reduction under this section. [If a
producer demonstrates that the producer does not have sufficient tax
liability under this chapter to claim the credit within five years from the
date the application for the credit is made, the producer is entitled to a
refund in the amount of any credit the comptroller determines may not be
claimed within that five years. Nothing in this subsection shall relieve
the obligation imposed by Subsection (b) to pay tax when due on high-cost
gas produced from co-production projects on or before July 31, 1995.]
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SECTION 2. Section 201.057,
Tax Code, is amended by amending Subsections (c), (e), (f), (g), and (i)
and adding Subsection (g-1) to read as follows:
(c) High-cost gas [as defined in Subsection (a)(2)(A)]
produced from a well that is spudded or completed after August 31, 1996, is
entitled to a reduction of the tax imposed by this chapter for the first
120 consecutive calendar months beginning on the first day of production,
or until the cumulative value of the tax reduction equals 50 percent of the
drilling and completion costs incurred for the well, whichever occurs
first. The amount of tax reduction shall be computed by subtracting from
the tax rate imposed by Section 201.052 the product of that tax rate times
the ratio of drilling and completion costs incurred for the well to twice
the median drilling and completion costs for high-cost wells [as defined in Subsection (a)(2)(A)]
spudded or completed during the previous state fiscal year, except that the
effective rate of tax may not be reduced below zero.
(e) The operator of a
proposed or existing gas well, including a gas well that has not been
completed, [or the operator of any proposed or existing oil or gas well
within a commission approved co-production project,] may apply to the
commission for certification that the well produces or will produce
high-cost gas. The [Such] application[, if seeking
certification as high-cost gas according to Subsection (a)(2)(A),] may
be made at any time after the first day of production. The application may
be made but is not required to be made concurrently with a request for a
determination that gas produced from the well is high-cost natural gas for
purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et
seq.) [or with a request for commission approval of a co-production
project]. The commission may require an applicant to provide the
commission with any relevant information required to administer this
section. For purposes of this section, a determination that gas is
high-cost natural gas for purposes of
the Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) [according to Subsection
(a)(2)(A) or a determination that gas is produced from within a commission
approved co-production project] is a certification that the gas is
high-cost gas for purposes of this section, and in that event additional
certification is not required to qualify for the [exemption or] tax
reduction provided by this section.
(f) To qualify for the [exemption
or] tax reduction provided by this section, the person responsible for
paying the tax must apply to the comptroller. The application must contain
the certification of the commission that the well produces high-cost gas
and[, if the application is for a well spudded or completed after
September 1, 1995,] must contain a report of drilling and completion
costs incurred for each well on a form and in the detail as determined by
the comptroller. Drilling and completion costs for a recompletion shall
only include current and contemporaneous costs associated with the
recompletion. Notwithstanding any other provision of this section, to
obtain the maximum [tax exemption or] tax reduction [deduction],
an application to the comptroller for certification according to Subsection
(a)(2) [(a)(2)(A)] must be filed with the comptroller at the
later of the 180th day after the date of first production or the 45th day
after the date of approval by the commission. If the application is not
filed by the applicable deadline, the [tax exemption or] tax reduction [deduction] is reduced by 10 percent for the
period beginning on the 180th day after the first day of production and
ending on the date on which the application is filed with the comptroller. [An
application to the comptroller for certification according to Subsection
(a)(2)(B) may not be filed before January 1, 1990, or after December 31,
1998.] The comptroller shall approve the application of a person who
demonstrates that the gas is eligible for the [exemption or] tax
reduction. The comptroller may require a person applying for the [exemption
or] tax reduction to provide any relevant information in the person's
monthly report that the comptroller considers necessary to administer this
section. The commission shall notify the comptroller in writing immediately
if it determines that a [an oil or gas] well previously
certified as producing high-cost gas does not produce high-cost gas or if
it takes any action or discovers any information that affects the
eligibility of gas for a [an exemption or] tax reduction
under this section.
(g) As soon as practicable
after March 1 of each year, the comptroller shall determine [from
reports containing drilling and completion cost data as required on
applications to the comptroller under Subsection (f),] the median
drilling and completion cost for all high-cost wells [as defined in Subsection
(a)(2)(A)] for which an application for a tax reduction [exemption or reduced tax] was
made during the previous state fiscal year. In making the determination,
the comptroller shall use the drilling and completion cost data required to be reported to the comptroller under
Subsection (f). The [Those] median drilling and completion cost
[costs] shall be used to compute the reduced tax under Subsection
(c) and is fixed on the date of the comptroller's determination under
this subsection.
(g-1) The report of
drilling and completion costs required under Subsection (f) may not be
amended after March 1 of the year following the state fiscal year in which
the application was made.
(i) If, before the commission
certifies that a well produces high-cost gas or before the comptroller
approves an application for a [an exemption or] tax reduction
under this section, the tax imposed by this chapter is paid on high-cost
gas that otherwise qualifies for the [exemption or] tax reduction
provided by this section, the person who remitted the tax is [producer
or producers of the gas are] entitled to a refund [credit
against other taxes imposed by this chapter] in an amount equal to the difference
between the amount of the tax paid on the gas and the amount of tax
that would have been paid on the gas if it had received a [that
otherwise qualified for the exemption or] tax reduction under this
section
[on or after the first day
of the next month after the month in which the application for
certification under this section was filed with the commission]. The
[If the application for certification is submitted to the commission
after January 1, 2004, the] total allowable refund [credit]
for taxes paid for reporting periods before the date the application is
filed may not exceed the total tax paid on the gas that otherwise qualified
for the [exemption or] tax reduction and that was produced during
the 24 consecutive calendar months immediately preceding the month in which
the application for certification under this section that the comptroller approved was
filed with the commission. [The credit is allocated to each producer
according to the producer's proportionate share in the gas.] To receive
a refund [credit], the person entitled to the refund [one
or more of the producers] must apply to the comptroller for the refund
[credit] not later than the first anniversary after the date the
comptroller approves the application for a [an exemption or]
tax reduction under this section. [If a producer demonstrates that the
producer does not have sufficient tax liability under this chapter to claim
the credit within five years from the date the application for the credit
is made, the producer is entitled to a refund in the amount of any credit
the comptroller determines may not be claimed within that five years. Nothing
in this subsection shall relieve the obligation imposed by Subsection (b)
to pay tax when due on high-cost gas produced from co-production projects
on or before July 31, 1995.]
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