86R3262 SMT-F
 
  By: Paddie, Springer H.B. No. 1558
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the severance tax exemption for oil and gas produced
  from certain inactive wells.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 202.056(a)(4), Tax Code, is amended to
  read as follows:
               (4)  "Two-year inactive well" means a well that has not
  produced oil or gas in more than one month in the two years
  preceding the date of application for severance tax exemption under
  this section. The term does not include a well that is:
                     (A)  part of an enhanced oil recovery project, as
  defined by Section 89.002, Natural Resources Code; or
                     (B)  drilled but not completed and that does not
  have a record of hydrocarbon production reported to the commission.
         SECTION 2.  Section 202.056, Tax Code, is amended by
  amending Subsections (b), (c), (d), (e), (h), and (i) and adding
  Subsections (j) and (k) to read as follows:
         (b)  Hydrocarbons produced from a well qualify for a
  five-year [10-year] severance tax exemption if the commission
  designates the well as a [three-year inactive well or a] two-year
  inactive well. The commission may require an applicant to provide
  the commission with any relevant information required to administer
  this section. The commission may require additional well tests to
  determine well capability as the commission [it] deems necessary.
  The commission shall notify the comptroller in writing immediately
  if the commission [it] determines that the operation of the
  [three-year inactive well or] two-year inactive well has been
  terminated or if the commission [it] discovers any information that
  affects the taxation of the production from the designated well.
         (c)  [If the commission designates a three-year inactive
  well under this section, it shall issue a certificate designating
  the well as a three-year inactive well as defined by Subsection
  (a)(3) of this section. The commission may not designate a
  three-year inactive well under this section after February 29,
  1996.] If the commission designates a two-year inactive well under
  this section, the commission [it] shall issue a certificate
  designating the well as a two-year inactive well [as defined by
  Subsection (a)(4) of this section. The commission may not
  designate a two-year inactive well under this section after
  February 28, 2010].
         (d)  [An application for three-year inactive well
  certification shall be made during the period of September 1, 1993,
  through August 31, 1995, to qualify for the tax exemption under this
  section.] An application for two-year inactive well certification
  must be made to the commission [shall be made during the period
  September 1, 1997, through August 31, 2009,] to qualify for the tax
  exemption under this section. Hydrocarbons sold after the date of
  certification are eligible for the tax exemption.
         (e)  The commission may revoke a certificate if information
  indicates that a certified well was not a [three-year inactive well
  or a] two-year inactive well[, as appropriate,] or if other lease
  production is credited to the certified well. Upon notice to the
  operator from the commission that the certificate for tax exemption
  under this section has been revoked, the tax exemption may not be
  applied to hydrocarbons sold from that well from the date of
  revocation.
         (h)  If the tax is paid at the full rate provided by Section
  201.052(a) or [, 201.052(b),] 202.052(a)[, or 202.052(b)] before
  the comptroller approves an application for an exemption provided
  for in this chapter, the operator is entitled to a credit against
  taxes imposed by this chapter in an amount equal to the tax paid. To
  receive a credit, the operator must apply to the comptroller for the
  credit before the expiration of the applicable period for filing a
  tax refund claim under Section 111.104.
         (i)  A [Penalties
               [(1)  Any] person who makes or subscribes any
  application, report, or other document and submits the application,
  report, or other document [it] to the commission to form the basis
  for an application for a tax exemption under this section, knowing
  that the application, report, or other document is false or untrue
  in a material fact, may be subject to the penalties imposed by
  Chapters 85 and 91, Natural Resources Code.
         (j)  On [(2)  Upon] notice from the commission that the
  certification for a [three-year inactive well or a] two-year
  inactive well has been revoked, the tax exemption shall not apply to
  oil or gas production sold after the date of notification. A [Any]
  person who violates this subsection is liable to the state for a
  civil penalty if the person applies or attempts to apply the tax
  exemption allowed by this chapter after the certification for a
  [three-year inactive well or a] two-year inactive well is revoked.
  The amount of the penalty may not exceed the sum of:
               (1) [(A)]  $10,000; and
               (2) [(B)]  the difference between the amount of taxes
  paid or attempted to be paid and the amount of taxes due.
         (k) [(3)]  The attorney general may recover a penalty under
  Subsection (j) [Subdivision (2) of this subsection] in a suit
  brought on behalf of the state. Venue for the suit is in Travis
  County.
         SECTION 3.  Section 202.056(a)(3), Tax Code, is repealed.
         SECTION 4.  The changes in law made by this Act apply only to
  an oil or gas well designated by the Railroad Commission of Texas as
  a two-year inactive well on or after the effective date of this Act.
  An oil or gas well designated by the Railroad Commission of Texas as
  a two-year inactive well, or as a three-year inactive well, before
  the effective date of this Act is governed by the law in effect
  immediately before that date, and the former law is continued in
  effect for that purpose.
         SECTION 5.  This Act takes effect September 1, 2019.