86R5507 CBH/JXC-F
 
  By: Ashby H.B. No. 3067
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to an oil and gas production tax credit for oil and gas
  producers that provide produced water for recycling.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle I, Title 2, Tax Code, is amended by
  adding Chapter 207 to read as follows:
  CHAPTER 207. TAX CREDIT FOR PROVIDING PRODUCED WATER TO BE RECYCLED
         Sec. 207.0001.  DEFINITIONS. In this chapter:
               (1)  "Permit holder" means a person who holds all
  federal and state permits required to recycle produced water so
  that the water may be discharged into or adjacent to water in the
  state.
               (2)  "Produced water" means water produced in oil or
  gas drilling, completion, flowback, or production.
               (3)  "Producer" has the meaning assigned by Section
  201.001 or 202.001, as appropriate.
               (4)  "Railroad commission" means the Railroad
  Commission of Texas.
               (5)  "Water in the state" has the meaning assigned by
  Section 26.001, Water Code.
         Sec. 207.0002.  TAX CREDIT. (a) A producer is entitled to a
  credit against the tax imposed under Chapter 201 or 202, as
  applicable, in the amount and under the conditions and limitations
  provided by this chapter if:
               (1)  the producer provides to a permit holder produced
  water that has a total dissolved solids concentration of more than
  90,000 milligrams per liter;
               (2)  the permit holder recycles the produced water so
  that the water may be discharged into or adjacent to water in the
  state or sold, regardless of whether the water is actually
  discharged or is sold, and complies with any federal and state
  permit requirements for recycling the produced water; and
               (3)  the resulting fresh water meets standards for
  discharge into water in the state under the federal National
  Pollutant Discharge Elimination System program and the permit
  holder complies with any state or federal requirements for testing
  and reporting the quality of the water before discharge.
         (b)  Except as provided by Section 207.0003, the total amount
  of the credit under this chapter for a reporting period is computed
  by:
               (1)  determining the total number of barrels of
  produced water described by Subsection (a) provided to a permit
  holder during the reporting period that is subsequently recycled
  during that period;
               (2)  multiplying the number of barrels determined under
  Subdivision (1) by the monthly average closing price of a barrel of
  West Texas Intermediate crude oil as recorded on the New York
  Mercantile Exchange (NYMEX); and
               (3)  multiplying the amount determined under
  Subdivision (2) by:
                     (A)  3.75 percent if the credit is claimed under
  Chapter 201; or
                     (B)  2.3 percent if the credit is claimed under
  Chapter 202.
         (c)  Produced water provided to a permit holder may be
  counted only once in determining the amount of a credit.  Only one
  producer may claim a credit for the same produced water.
         Sec. 207.0003.  LIMITATION ON CREDIT AMOUNT. (a) Except as
  provided by Subsection (b), the total amount of credits that may be
  claimed under this chapter each state fiscal year may not exceed $25
  million.
         (b)  If in the first year of a state fiscal biennium the
  amount claimed under this chapter is less than $25 million, the
  amount of credits that may be claimed in the second year of the
  state fiscal biennium is equal to the sum of:
               (1)  $25 million; and
               (2)  the difference between $25 million and the amount
  of credits claimed in the first state fiscal year.
         (c)  Each month, the comptroller shall post on the
  comptroller's Internet website the amount of unclaimed credit
  remaining for the state fiscal year.
         (d)  The comptroller by rule shall prescribe procedures by
  which the comptroller may allocate credits if the limit prescribed
  by Subsection (a) is reached before the end of the state fiscal
  year.
         Sec. 207.0004.  PERMIT HOLDER REQUIREMENTS; MONTHLY REPORT.
  The railroad commission shall adopt a registration process for
  permit holders who participate in the program established by this
  chapter.  Each registered permit holder shall submit to the
  railroad commission a monthly report that includes, for the
  preceding month:
               (1)  the metered volume in gallons of produced water
  the permit holder received from each producer and recycled;
               (2)  the total dissolved solids concentration of the
  produced water received from each producer before recycling; and
               (3)  the volume of recycled water discharged into water
  in the state or sold.
         Sec. 207.0005.  CERTIFICATION. (a)  To be eligible for the
  credit under this chapter, the producer must apply to the railroad
  commission for certification that:
               (1)  the producer has, during the reporting period,
  provided to a permit holder produced water that has a total
  dissolved solids concentration of more than 90,000 milligrams per
  liter; and
               (2)  the permit holder recycled the water during the
  reporting period.
         (b)  The producer shall include with the certificate
  application any information the railroad commission determines is
  necessary to certify eligibility for the credit and the amount of
  the credit, including information sufficient for the railroad
  commission to identify:
               (1)  the metered volume in gallons of produced water
  provided to a permit holder for which the producer intends to claim
  a credit; and
               (2)  the total dissolved solids concentration of that
  metered volume of produced water.
         (c)  The railroad commission shall consider the information
  provided by the permit holder under Section 207.0004 in determining
  whether to certify eligibility for the credit and the amount of the
  credit.
         (d)  If the producer and permit holder provide sufficient
  information under this section and Section 207.0004, the railroad
  commission shall issue a certificate of eligibility to the
  producer. The certificate must include:
               (1)  the information the permit holder is required to
  provide under Section 207.0004; and
               (2)  the information the producer is required to
  provide under Subsection (b) of this section.
         (e)  The railroad commission shall immediately notify the
  comptroller in writing if the railroad commission:
               (1)  determines that a producer that previously
  received a certificate under this section was not eligible for the
  certified credit or is no longer eligible to receive the certified
  credit; or
               (2)  takes any action or discovers any information that
  affects the eligibility of the producer for a credit.
         Sec. 207.0006.  APPLICATION. (a) To claim the credit under
  this chapter, the person responsible for paying the tax imposed
  under Chapter 201 or 202, as appropriate, must apply to the
  comptroller.
         (b)  The application must include a copy of the certificate
  issued by the railroad commission under Section 207.0005 for the
  reporting period and any other information required by the
  comptroller to sufficiently demonstrate that the producer is
  eligible for the credit and the amount of the credit.
         (c)  In addition to the information required by Subsection
  (b), the comptroller may require additional information on a report
  required under Subchapter E, Chapter 201, or Subchapter E, Chapter
  202.
         (d)  The comptroller shall approve the application of a
  person who demonstrates that the recycled water is eligible for the
  credit.
         Sec. 207.0007.  RULES. The comptroller and the railroad
  commission shall adopt rules necessary to implement this chapter.
         SECTION 2.  Chapter 207, Tax Code, as added by this Act,
  applies only to produced water provided to a permit holder, as
  described by Chapter 207, Tax Code, as added by this Act, on or
  after the effective date of this Act. Produced water provided
  before the effective date of this Act is subject to the law in
  effect when the produced water was provided, and that law is
  continued in effect for that purpose.
         SECTION 3.  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 4.  This Act takes effect September 1, 2019.