88R7943 CJD-F
 
  By: King S.B. No. 1407
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to a severance tax exemption for oil and gas produced from
  certain restimulation wells; providing a civil penalty.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter B, Chapter 202, Tax Code, is amended
  by adding Section 202.062 to read as follows:
         Sec. 202.062.  TAX EXEMPTION FOR OIL AND GAS PRODUCED FROM
  RESTIMULATION WELLS. (a)  In this section:
               (1)  "Commission" means the Railroad Commission of
  Texas.
               (2)  "Consecutive months" means months in consecutive
  order, regardless of whether an oil or gas well produces
  hydrocarbons during any or all of those months.
               (3)  "Hydrocarbons" means the oil, gas, condensate, and
  other hydrocarbons produced from an oil or gas well.
               (4)  "Operator" means the person responsible for the
  actual physical operation of an oil or gas well.
               (5)  "Qualifying well" means a restimulation well that
  has been certified by the commission under this section as a
  qualifying well.
               (6)  "Restimulation costs" means expenses that are
  directly attributable to payment for the restimulation treatment
  performed on a restimulation well.
               (7)  "Restimulation treatment" means the treatment of
  an oil or gas well with an application of fluid under pressure for
  the purpose of initiating or propagating fractures in a target
  geologic formation to enhance the production of hydrocarbons from
  the well.
               (8)  "Restimulation well" means a previously completed
  oil or gas well that:
                     (A)  is classified by the commission as a marginal
  well, as described by Section 85.122, Natural Resources Code, or a
  marginal gas well, as defined by Section 86.091, Natural Resources
  Code; and
                     (B)  following production of hydrocarbons,
  received a restimulation treatment.
         (b)  This section does not apply to an oil or gas well that:
               (1)  has less than 60 months of production reported to
  the commission before the date a restimulation treatment is
  performed;
               (2)  is part of an enhanced oil recovery project, as
  defined by Section 89.002, Natural Resources Code; or
               (3)  is drilled but not completed and that does not have
  a record of hydrocarbon production reported to the commission.
         (c)  Hydrocarbons produced from a qualifying well are exempt
  from the taxes imposed by Chapter 201 and this chapter until the
  earlier of:
               (1)  the last day of the 60th consecutive month
  following the month in which the well first produces hydrocarbons
  after a restimulation treatment is completed; or 
               (2)  the date on which the cumulative amount of taxes
  exempted under Chapter 201 and this chapter and any credit under
  Subsection (l) equals:
                     (A)  if the qualifying well is a restimulation
  well, 50 percent of the restimulation costs described by Subsection
  (j); or
                     (B)  if the qualifying well is a restimulation
  well on which the restimulation treatment was performed using
  hydraulic fracturing pumps powered exclusively by electricity or
  natural gas, 75 percent of the restimulation costs described by
  Subsection (j).
         (d)  Notwithstanding Section 201.057, gas produced from a
  qualifying well that was previously certified by the commission as
  a well that produces or will produce high-cost gas is not eligible
  for the tax reduction provided by that section during the period the
  gas is exempt from tax under Subsection (c) of this section.
         (e)  The operator of a restimulation well may apply to the
  commission for certification that the well is a qualifying well.  
  The application may be made at any time after the first day the well
  produces hydrocarbons following the date a restimulation treatment
  is completed. The commission may require an applicant to provide
  any relevant information required to administer this section.
         (f)  If the commission approves an application submitted
  under Subsection (e), the commission shall issue a certificate
  designating the well as a qualifying well and specifying whether
  the restimulation treatment was performed using hydraulic
  fracturing pumps powered exclusively by electricity or natural gas.
         (g)  The commission may revoke a certificate issued under
  Subsection (f) if the commission determines that:
               (1)  a well that was certified as a qualifying well is
  not a restimulation well;
               (2)  if the certificate specifies that the
  restimulation treatment was performed on a qualifying well using
  hydraulic fracturing pumps powered exclusively by electricity or
  natural gas, the restimulation treatment was performed using a
  method other than the method specified in the certificate; or
               (3)  the operator is claiming or has claimed an
  exemption under this section for hydrocarbons produced from a well
  that is not a qualifying well.
         (h)  The commission shall notify an operator that a
  certificate issued under Subsection (f) has been revoked. An
  exemption provided by this section is automatically revoked on the
  date the commission revokes a certificate unless the commission
  issues a new certificate for the well.  Hydrocarbons produced from
  the well after the date a certificate is revoked are not eligible
  for the exemption provided by this section.
         (i)  To qualify for the exemption provided by this section,
  the person responsible for paying the tax must apply to the
  comptroller.  The comptroller shall determine the form and content
  of the application, which must include:
               (1)  the certificate issued by the commission under
  Subsection (f); and
               (2)  a report of the restimulation costs incurred to
  perform the restimulation treatment on the qualifying well from
  which the hydrocarbons that are the subject of the application are
  produced.
         (j)  For the purposes of Subsection (i)(2), restimulation
  costs include only the current and contemporaneous restimulation
  costs associated with performing the restimulation treatment.
         (k)  The comptroller shall approve an application for an
  exemption provided by this section if the application meets the
  requirements of this section.  The comptroller may require the
  person applying for the exemption to provide any relevant
  information necessary to administer this section. The comptroller
  by rule may establish procedures to comply with this section.
         (l)  If the tax imposed under Chapter 201 or this chapter, as
  applicable, is paid at the applicable rate on hydrocarbons produced
  from a qualifying well on or after the date the commission issues a
  certificate for the well under Subsection (f) but before the date
  the comptroller approves an application for an exemption for
  hydrocarbons produced from the well under Subsection (k), the
  person responsible for paying the tax is entitled to a credit
  against the taxes due under Chapter 201 or this chapter in an amount
  equal to the amount of tax paid during that period on hydrocarbons
  produced from the qualifying well. To receive the credit, the
  person responsible for paying the tax must apply to the comptroller
  before the expiration of the applicable period for filing a tax
  refund claim under Section 111.104.
         (m)  A person who makes or submits an application, report, or
  other document or item of information to the commission or the
  comptroller under this section that the person knows is false or
  untrue in a material fact is subject to the penalties imposed by
  Chapters 85 and 91, Natural Resources Code.
         (n)  A person who applies or attempts to apply for an
  exemption under this section for hydrocarbons produced from a well
  the person knows is not a qualifying well is liable to the state for
  a civil penalty. The amount of the penalty may not exceed the sum
  of:
               (1)  $10,000; and
               (2)  the difference between the amount of taxes paid or
  attempted to be paid and the amount of taxes due.
         (o)  The attorney general may recover a penalty under
  Subsection (n) in a suit brought on behalf of the state. Venue for
  the suit is in Travis County.
         (p)  The commission may adopt rules necessary to administer
  this section.
         SECTION 2.  Section 202.062, Tax Code, as added by this Act,
  applies only to hydrocarbons produced on or after January 1, 2024.
         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 January 1, 2024.