By: Herrero H.B. No. 4021
A BILL TO BE ENTITLED
AN ACT
Relating to creating a tax severance credit for oil and gas
operators for use of alternative fluids in place of fresh water
solely in the process of hydraulic fracturing (fracking).
BE IT ENACTED BY THE STATE OF TEXAS:
Section 1. Subchapter B, Chapter 201 Tax Code, is amended by
adding Section 201.061 to read as follows:
Sec. 201.061 TAX REFUND OR CREDIT FOR USE OF ALTERNATIVE
FLUIDS IN HYDRAULIC FRACTURING.
(a) In this section:
(1) "Fresh water" means any surface or fresh
groundwater with less than 3,000 milligrams per liter total
dissolved solids.
(2) "Brackish Groundwater" means any groundwater
3,000 milligrams per liter or more total dissolved solids (TDS), as
defined by the Railroad Commission of Texas as base of
usable-quality groundwater.
(3) "Hydraulic fracturing fluid" means the fluid used
to hydraulically fracture a well at the time of its initial
completion.
(4) "Alternative fluid" includes brackish
groundwater, desalinated, recycled, municipal treated water or any
other technologies that may be developed as alternative to fresh
water.
(5) "Comptroller" means the Texas Comptroller of
Public Accounts.
(6) "RRC" means the Railroad Commission of Texas.
(b) The operator of an oil or natural gas well may apply for
a $50,000 per well tax credit from the taxes imposed under Title 2,
Chapter 201 and 202, providing the hydraulic fracturing fluid
consists entirely of fluids other than fresh water.
(c) The RRC will collect and maintain the requisite data to
monitor qualification for the tax credit. Specifically, the RRC
will append to its existing reporting requirement for newly drilled
wells for this optional tax credit:
(1) the volume of fluids used in hydraulic fracturing;
(2) location of source of alternative fluid, if not
groundwater;
(3) for groundwater, respondents must provide quality
of the groundwater expressed in TDS (parts per million of total
dissolved solids); and
(4) for groundwater, the GPS location of the source
well.
(d) Each quarter, the RRC will provide to the Comptroller a
list of new wells qualifying for the tax credit and identify the
operator. To receive the tax credit, the operator of the well must
apply to the Comptroller for the tax credit.
(e) The RRC by rule shall create or use a form or forum for
producers to certify the qualification for the credit.
(f) The RRC may conduct random inspections to enforce this
section as the RRC deems appropriate.
(g) Penalty for claiming a tax credit based on false
information supplied to the RRC which would otherwise disqualify
the claim will result in a penalty as deemed appropriate by RRC.
(h) The RRC may recognize oil and gas operators who made
significant progress in the use of alternative fluids.
(i) The tax credit will begin January 1, 2016 and by
December 31, 2019, the RRC will report the status of the program's
progress to further discuss extension of the incentive program.
Section 2. Subchapter B, Chapter 202 Tax Code, is amended by
adding Section 202.064 to read as follows:
Sec. 202.064 TAX REFUND OR CREDIT FOR USE OF ALTERNATIVE
FLUIDS IN HYDRAULIC FRACTURING.
(a) In this section:
(1) "Fresh water" means any surface or fresh
groundwater with less than 3,000 milligrams per liter total
dissolved solids.
(2) "Brackish Groundwater" means any groundwater
3,000 milligrams per liter or more total dissolved solids (TDS), as
defined by the Railroad Commission of Texas as base of
usable-quality groundwater.
(3) "Hydraulic fracturing fluid" means the fluid used
to hydraulically fracture a well at the time of its initial
completion.
(4) "Alternative fluid" includes brackish
groundwater, desalinated, recycled, municipal treated water or any
other technologies that may be developed as alternative to fresh
water.
(5) "Comptroller" means the Texas Comptroller of
Public Accounts.
(6) "RRC" means the Railroad Commission of Texas.
(b) The operator of an oil or natural gas well may apply for
a $50,000 per well tax credit from the taxes imposed under Title 2,
Chapter 201 and 202, providing the hydraulic fracturing fluid
consists entirely of fluids other than fresh water.
(c) The RRC will collect and maintain the requisite data to
monitor qualification for the tax credit. Specifically, the RRC
will append to its existing reporting requirement for newly drilled
wells for this optional tax credit:
(1) the volume of fluids used in hydraulic fracturing;
(2) location of source of alternative fluid, if not
groundwater;
(3) for groundwater, respondents must provide quality
of the groundwater expressed in TDS (parts per million of total
dissolved solids); and
(4) for groundwater, the GPS location of the source
well.
(d) Each quarter, the RRC will provide to the Comptroller a
list of new wells qualifying for the tax credit and identify the
operator. To receive the tax credit, the operator of the well must
apply to the Comptroller for the tax credit.
(e) The RRC by rule shall create or use a form or forum for
producers to certify the qualification for the credit.
(f) The RRC may conduct random inspections to enforce this
section as the RRC deems appropriate.
(g) Penalty for claiming a tax credit based on false
information supplied to the RRC which would otherwise disqualify
the claim will result in a penalty as deemed appropriate by RRC.
(h) The RRC may recognize oil and gas operators who made
significant progress in the use of alternative fluids.
(i) The tax credit will begin January 1, 2016 and by
December 31, 2019, the RRC will report the status of the program's
progress to discuss extension of the incentive program.