Bill Text: TX SB1407 | 2023-2024 | 88th Legislature | Introduced
Bill Title: Relating to a severance tax exemption for oil and gas produced from certain restimulation wells; providing a civil penalty.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2023-03-16 - Referred to Finance [SB1407 Detail]
Download: Texas-2023-SB1407-Introduced.html
88R7943 CJD-F | ||
By: King | S.B. No. 1407 |
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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. |