85R19229 ADM-F
 
  By: Darby H.B. No. 2277
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the temporary exemption or tax reduction for certain
  high-cost gas.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         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].
         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.]
         SECTION 3.  Sections 201.057(a)(3), (a)(4), (a)(5), (b),
  (d), and (j), Tax Code, are repealed.
         SECTION 4.  The change in law made by this Act does not
  affect tax liability accruing before the effective date of this
  Act. That liability continues in effect as if this Act had not been
  enacted, and the former law is continued in effect for the
  collection of taxes due and for civil and criminal enforcement of
  the liability for those taxes.
         SECTION 5.  This Act takes effect September 1, 2017.