By: Hinojosa S.B. No. 1999
 
 
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to an oil and gas production tax credit for oil and gas
  producers that provide treated produced water to aquifer storage
  and recovery project operators.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle I, Title 2, Tax Code, is amended by
  adding Chapter 208 to read as follows:
  CHAPTER 208. TAX CREDIT FOR PROVIDING TREATED PRODUCED WATER TO
  AQUIFER STORAGE AND RECOVERY PROJECT OPERATOR
         Sec. 208.0001.  DEFINITIONS. In this chapter:
               (1)  "Aquifer storage and recovery project" means a
  project involving the injection of water into a geologic formation
  for the purpose of subsequent recovery and beneficial use.
               (2)  "Commission" means the Texas Commission on
  Environmental Quality.
               (3)  "Produced water" means water produced in oil or
  gas drilling, completion, flowback, or production.
               (4)  "Producer" has the meaning assigned by Section
  201.001 or 202.001, as appropriate.
               (5)  "Project operator" means a person who undertakes
  an aquifer storage and recovery project.
         Sec. 208.0002.  TAX CREDIT. (a) A producer is entitled to a
  credit against the tax imposed under Chapter 202, as applicable, in
  the amount and under the conditions and limitations provided by
  this chapter if:
               (1)  the producer provides to a project operator
  produced water that has a total dissolved solids concentration of
  more than 90,000 milligrams per liter; and
               (2)  the project operator treats the water for
  injection into an aquifer for storage and recovery and shall not
  degredate native groundwater , and complies with any federal and
  state registration or permit requirements for treating and
  injecting the produced water, including any requirements for water
  testing and water quality reporting.
         (b)  Except as provided by Section 208.0003, 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 project
  operator during the reporting period that is subsequently treated
  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:
                       2.3 percent requiring the credit to be claimed
  under Chapter 202.
         (c)  Produced water provided to a project operator 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. 208.0003.  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 on a prorated basis if
  the limit prescribed by Subsection (a) is reached before the end of
  the state fiscal year.
         Sec. 208.0004.  PROJECT OPERATOR REQUIREMENTS; MONTHLY
  REPORT. (a) The commission shall adopt a registration process for
  project operators who participate in the program established by
  this chapter. Each registered project operator shall submit to the
  commission a monthly report that includes, for the preceding month:
               (1)  the metered volume in barrels of produced water
  the project operator received from each producer and treated;
               (2)  the total dissolved solids concentration of the
  produced water received from each producer before treatment; and
               (3)  the volume of treated water injected into an
  aquifer for storage and recovery.
         (b)  A project operator must hold a permit from the Railroad
  Commission of Texas authorizing the project operator to treat fluid
  oil and gas waste at a commercial recycling facility.
         Sec. 208.0005.  CERTIFICATION. (a) To be eligible for the
  credit under this chapter, the producer must apply to the
  commission for certification that:
               (1)  the producer has, during the reporting period,
  provided to a project operator produced water that has a total
  dissolved solids concentration of more than 90,000 milligrams per
  liter before injection into an aquifer for storage and recovery;
  and
               (2)  the project operator treated the water during the
  reporting period.
         (b)  The producer shall include with the certificate
  application any information the commission determines is necessary
  to certify eligibility for the credit and the amount of the credit,
  including information sufficient for the commission to identify:
               (1)  the metered volume in barrels of produced water
  provided to a project operator 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 commission shall consider the information provided
  by the project operator under Section 208.0004 in determining
  whether to certify eligibility for the credit and the amount of the
  credit.
         (d)  If the producer and project operator provide sufficient
  information under this section and Section 208.0004, the commission
  shall issue a certificate of eligibility to the producer. The
  certificate must include:
               (1)  the information the project operator is required
  to provide under Section 208.0004; and
               (2)  the information the producer is required to
  provide under Subsection (b) of this section.
         (e)  The commission shall immediately notify the comptroller
  in writing if the 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. 208.0006.  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 commission under Section 208.0005 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 treated water is eligible for the
  credit.
         Sec. 208.0007.  RULES. The comptroller and the commission
  shall adopt rules necessary to implement this chapter.
         SECTION 2.  Chapter 208, Tax Code, as added by this Act,
  applies only to produced water provided to a project operator, as
  described by Chapter 208, 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.