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A BILL TO BE ENTITLED
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AN ACT
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relating to a severance tax credit for gas produced from certain |
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wells that use an onsite flare mitigation system. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 201, Tax Code, is amended |
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by adding Section 201.061 to read as follows: |
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Sec. 201.061. TAX CREDIT FOR GAS PRODUCED FROM WELL USING |
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ONSITE FLARE MITIGATION SYSTEM. (a) In this section: |
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(1) "Commission" means the Railroad Commission of |
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Texas. |
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(2) "Flare mitigation" means the quantity of British |
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thermal units of heat content of gas used by a qualifying onsite |
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flare mitigation system. The term does not include the heat content |
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of any gas flared from a well before, during, or after intake by an |
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onsite flare mitigation system. |
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(3) "Marginal well" has the meaning assigned by |
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Section 85.121, Natural Resources Code. |
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(4) "Qualifying onsite flare mitigation system" means |
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a system that: |
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(A) is installed at a well site on or after May |
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29, 2023; |
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(B) takes in gas and natural gas liquids from the |
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well; |
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(C) separates and collects or uses over 50 |
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percent of the propane and heavier hydrocarbons taken in from the |
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well; |
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(D) reduces flared thermal intensity: |
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(i) by compressing or liquefying gas for |
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use as fuel or for transport to a processing facility; or |
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(ii) as a result of gas or natural gas |
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liquids being: |
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(a) used to produce petrochemicals or |
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fertilizer; |
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(b) converted into liquid fuels; |
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(c) used to generate electricity for |
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onsite use or supply to the electrical grid; |
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(d) used to produce computational |
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power; or |
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(e) used in another beneficial |
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process approved by the commission; |
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(E) is not installed on: |
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(i) a marginal well; or |
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(ii) a well that is connected to a pipeline |
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with available takeaway capacity or that may be connected to such a |
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pipeline in a technically and commercially feasible manner; and |
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(F) is not a: |
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(i) system that supports the normal |
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production operations of a well; |
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(ii) system that consumes gas as part of the |
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normal production operations of a well, such as a heater treater, a |
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separator, or a method of electrical dissipation through a load |
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bank; or |
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(iii) system or application traditionally |
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considered an on-pad use. |
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(5) "Qualifying well" means a well: |
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(A) that is: |
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(i) connected to a pipeline on which |
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pipeline takeaway capacity is unavailable; |
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(ii) not connected to a pipeline and for |
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which connection to a pipeline is technically or commercially |
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unfeasible but is operated by a well operator who has contractually |
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dedicated the well, the gas produced from the well, or the land or |
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lease on which the well is located to a pipeline operator; or |
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(iii) not connected to a pipeline and is |
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operated by a well operator who has not contractually dedicated the |
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well, the gas produced from the well, or the land or lease on which |
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the well is located to a pipeline operator; and |
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(B) on which a qualifying onsite flare mitigation |
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system is installed. |
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(6) "Sour gas" has the meaning assigned by Section |
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86.002, Natural Resources Code. |
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(b) The person responsible for paying the tax imposed by |
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this chapter on gas produced from a qualifying well is entitled to a |
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credit against that tax. Subject to Subsection (i), the amount of |
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the credit to which the person is entitled is: |
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(1) $1 per million British thermal units of flare |
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mitigation that results from the operation of the qualifying onsite |
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flare mitigation system installed on the qualifying well; or |
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(2) if the qualifying well produces sour gas, $2 per |
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million British thermal units of flare mitigation that results from |
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the operation of the qualifying onsite flare mitigation system |
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installed on the qualifying well. |
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(c) A well operator and a pipeline operator, as applicable, |
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may apply to the commission in the manner provided by Subsection |
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(d), (e), or (f) for certification that a well is a qualifying well |
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and, if applicable, that the well produces sour gas. |
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(d) An application that relates to a well described by |
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Subsection (a)(5)(A)(i) must: |
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(1) attest to the lack of pipeline takeaway capacity; |
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(2) if applicable, attest that the well produces sour |
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gas; and |
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(3) be submitted jointly by the well operator and the |
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pipeline operator. |
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(e) An application that relates to a well described by |
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Subsection (a)(5)(A)(ii) must: |
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(1) attest that: |
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(A) the well is not connected to a pipeline; and |
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(B) it is technically or commercially unfeasible |
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to connect the well to a pipeline; |
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(2) if applicable, attest that the well produces sour |
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gas; and |
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(3) be submitted jointly by the well operator and the |
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pipeline operator. |
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(f) An application that relates to a well described by |
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Subsection (a)(5)(A)(iii) must: |
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(1) attest that the well: |
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(A) is not connected to a pipeline; and |
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(B) is operated by a well operator who has not |
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contractually dedicated the well, the gas produced from the well, |
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or the land or lease on which the well is located to a pipeline |
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operator; |
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(2) if applicable, attest that the well produces sour |
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gas; and |
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(3) be submitted by the well operator. |
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(g) The commission may require an applicant described by |
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Subsection (c) to provide the commission with any information the |
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commission determines is relevant to determining whether a well is |
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a qualifying well and, if applicable, whether the well produces |
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sour gas. If the commission approves an application submitted |
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under Subsection (c), the commission shall issue a certificate |
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designating the well as a qualifying well and, if applicable, |
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indicate on the certificate that the well produces sour gas. |
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(h) To qualify for the credit provided by this section, the |
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person responsible for paying the tax imposed by this chapter must |
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apply to the comptroller. The application must contain the |
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certificate issued by the commission under Subsection (g). The |
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comptroller may require a person applying for the credit to provide |
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any additional information the comptroller determines is relevant |
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to determining whether the person is eligible to receive the |
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credit. |
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(i) A person may not claim an amount of credit on a report |
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that exceeds the amount of tax due on the report. |
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(j) The commission, well operator, or pipeline operator |
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shall notify the comptroller in writing immediately if a well |
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certified under this section is no longer a qualifying well. |
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(k) The commission and the comptroller may adopt rules |
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necessary to implement and administer this section. |
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SECTION 2. The change in law made by this Act does not |
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affect tax liability accruing before the effective date of this |
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Act. That liability continues in effect as if this Act had not been |
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enacted, and the former law is continued in effect for the |
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collection of taxes due and for civil and criminal enforcement of |
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the liability for those taxes. |
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SECTION 3. This Act takes effect September 1, 2023. |