84R6819 CBH-F
By: King of Uvalde H.B. No. 2691
A BILL TO BE ENTITLED
AN ACT
relating to a sales and use tax exemption and an oil and gas
severance tax credit for the use of alternative base fluids in
energized fracturing operations; imposing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended
by adding Section 151.3555 to read as follows:
Sec. 151.3555. ALTERNATIVE BASE FLUIDS AND RELATED TANGIBLE
PERSONAL PROPERTY. (a) In this section, "alternative base fluids"
has the meaning assigned by Section 205.001.
(b) The following are exempted from the taxes imposed by
this chapter:
(1) the sale, use, or other consumption of alternative
base fluids used in connection with an energized fracturing
operation in an oil or gas well; and
(2) tangible personal property specifically used to
process, reuse, or recycle alternative base fluids that will be
used in energized fracturing work performed at an oil or gas well.
SECTION 2. Subtitle I, Title 2, Tax Code, is amended by
adding Chapter 205 to read as follows:
CHAPTER 205. TAX CREDIT FOR OIL AND GAS PRODUCED USING ALTERNATIVE
BASE FLUIDS
Sec. 205.001. DEFINITIONS. In this chapter:
(1) "Alternative base fluids" means a continuous phase
fluid that is used in energized fracturing operations to produce
oil and gas. The term includes nitrogen, carbon dioxide, and fluids
other than water.
(2) "Operator" means the person responsible for the
actual physical operation of an oil or gas well.
Sec. 205.002. CREDIT FOR USE OF ALTERNATIVE BASE
FLUIDS. (a) The operator of an oil or gas well is entitled to a
credit as provided by this chapter if the volume of alternative base
fluids the operator uses as a substitution for water to produce the
oil or gas in an energized fracturing operation is equal to at least
20 percent of the total volume of fluid used in the fracturing
operation.
(b) The amount of credit to which an operator is entitled
under this chapter is an amount equal to a percentage of the taxes
imposed by Chapter 201 or 202 in the absence of the credit, but
after any other applicable tax credits or exemptions. The
percentage is equal to the lesser of:
(1) the percentage of the total volume of the base
fluids used in the fracturing operation that is alternative base
fluids; or
(2) 50 percent.
(c) The credit is allocated to each person who bears the tax
under Section 201.205 or 202.156, as applicable, according to the
person's proportionate share in the oil or gas produced.
Sec. 205.003. APPLICATION. (a) To qualify for the credit
provided under this chapter, the person responsible for paying the
tax must apply to the comptroller.
(b) The application must include any information required
by the comptroller and the FracFocus.org Hydraulic Fracturing Fluid
Product Component Information Disclosure report documenting the
Maximum Ingredient Concentration in HF Fluid (% by Mass) converted
to volume of the alternative base fluids for energized fracturing
operations for oil and gas production. The volume of alternative
base fluids is calculated according to the normal volume that the
base fluids would occupy as measured at the temperature and
pressure conditions at the ground surface before injection into the
well bore.
Sec. 205.004. PENALTIES. (a) A person is liable to this
state for a civil penalty if the person makes or subscribes an
application, report, or other document that forms the basis for an
application under Section 205.003 and submits it to the comptroller
knowing that it contains a false or untrue material fact. The amount
of the penalty may not exceed the sum of:
(1) $10,000; and
(2) the amount of the credit claimed.
(b) The attorney general may recover a penalty under
Subsection (a) in a suit brought on behalf of the state. Venue for
the suit is in Travis County.
SECTION 3. The comptroller shall adopt rules necessary to
administer Chapter 205, Tax Code, as added by this Act, not later
than December 31, 2015.
SECTION 4. Chapter 205, Tax Code, as added by this Act
applies only to oil or gas produced on or after the effective date
of this Act. Oil or gas produced before the effective date of this
Act is subject to the law in effect when the oil or gas was produced,
and that law is continued in effect for that purpose.
SECTION 5. 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 6. (a) Except as provided by Subsection (b) of this
section, this Act takes effect January 1, 2016.
(b) Section 3 of this Act takes effect immediately if this
Act receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, Section 3 of this Act takes effect September 1, 2015.