Texas 2017 - 85th Regular

Texas House Bill HB2621 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	85R2759 TJB-D
2	2	By: Darby H.B. No. 2621
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to state and local tax incentives for certain enhanced oil
8	8	recovery projects.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle B, Title 3, Natural Resources Code, is
11	11	amended by adding Chapter 93 to read as follows:
12	12	CHAPTER 93. ENHANCED OIL RECOVERY REINVESTMENT ZONES
13	13	SUBCHAPTER A. GENERAL PROVISIONS
14	14	Sec. 93.0001. DEFINITIONS. In this chapter:
15	15	(1) "Active operation" means the start and
16	16	continuation of an injection program for a tertiary recovery
17	17	project to enhance the displacement process in a reservoir.
18	18	(2) "Commission" means the Railroad Commission of
19	19	Texas.
20	20	(3) "Common source of supply" means a common reservoir
21	21	as defined by Section 86.002.
22	22	(4) "Enhanced recovery reinvestment zone" means an
23	23	enhanced recovery reinvestment zone designated by the commission
24	24	under Subchapter B.
25	25	(5) "Operator" means the person responsible for the
26	26	actual physical operation of a tertiary recovery project.
27	27	(6) "Payout" means the point at which all costs of
28	28	leasing, exploring, drilling, and operating have been recovered
29	29	from production of the field as defined by contract.
30	30	(7) "Positive production response" means that the rate
31	31	of oil production from the wells affected by a tertiary recovery
32	32	project is greater than the rate that would have occurred without
33	33	the project.
34	34	(8) "Tertiary recovery method" means a tertiary
35	35	recovery method listed in the federal June 1979 energy regulations
36	36	referred to in Section 4993, Internal Revenue Code of 1986, or
37	37	approved by the United States secretary of the treasury for
38	38	purposes of administering Section 4993, Internal Revenue Code of
39	39	1986, immediately before that section was repealed.
40	40	(9) "Tertiary recovery project" means the use of any
41	41	process for the displacement of oil from the earth using a tertiary
42	42	recovery method, including the use of an immiscible, miscible,
43	43	chemical, thermal, or biological process.
44	44	SUBCHAPTER B. DESIGNATION OF ENHANCED RECOVERY REINVESTMENT ZONE
45	45	Sec. 93.0051. ELIGIBILITY OF AREA FOR DESIGNATION AS
46	46	REINVESTMENT ZONE. An area is eligible to be designated as an
47	47	enhanced recovery reinvestment zone if:
48	48	(1) the area comprises a single field:
49	49	(A) identified through geologic studies on file
50	50	with the Bureau of Economic Geology or the United States Department
51	51	of Energy; and
52	52	(B) that encompasses a Cenozoic Era common source
53	53	of supply;
54	54	(2) a person is ready to begin active operations of a
55	55	tertiary recovery project in the area;
56	56	(3) the single field is projected to have a positive
57	57	production response as the result of active operations of the
58	58	tertiary recovery project not later than the second anniversary of
59	59	the date the commission designates the area as an enhanced recovery
60	60	reinvestment zone; and
61	61	(4) the designation of the area will be reasonably
62	62	likely to encourage development or redevelopment and improvement of
63	63	property in the reinvestment zone.
64	64	Sec. 93.0052. APPLICATION FOR DESIGNATION OF REINVESTMENT
65	65	ZONE, OPERATOR OF RECORD, AND TERTIARY RECOVERY PROJECT. (a) A
66	66	person may file an application with the commission requesting the
67	67	commission to designate:
68	68	(1) an area that meets the eligibility requirements of
69	69	Section 93.0051 as an enhanced recovery reinvestment zone;
70	70	(2) the person as the operator of record of the
71	71	tertiary recovery project for the reinvestment zone; and
72	72	(3) the tertiary recovery project located in the
73	73	reinvestment zone and operated by the person as the tertiary
74	74	recovery project for the reinvestment zone.
75	75	(b) The person must submit the application on a form
76	76	prescribed by the commission. The person must submit with the
77	77	application any information required by the commission to assist
78	78	the commission in making each designation described by Subsection
79	79	(a).
80	80	(c) The commission by rule shall prescribe the form of the
81	81	application described by this section.
82	82	Sec. 93.0053. DESIGNATION OF REINVESTMENT ZONE, OPERATOR OF
83	83	RECORD, AND TERTIARY RECOVERY PROJECT. (a) The commission by order
84	84	may designate:
85	85	(1) an area as an enhanced recovery reinvestment zone
86	86	if:
87	87	(A) a person files an application under Section
88	88	93.0052; and
89	89	(B) the commission finds that the area meets the
90	90	eligibility requirements prescribed by Section 93.0051;
91	91	(2) the person that submitted the application as the
92	92	operator of record of the tertiary recovery project for the
93	93	reinvestment zone; and
94	94	(3) the tertiary recovery project located in the
95	95	reinvestment zone and operated by the person as the tertiary
96	96	recovery project for the reinvestment zone.
97	97	(b) An order designating an area as an enhanced recovery
98	98	reinvestment zone must:
99	99	(1) make each designation described by Subsection (a);
100	100	(2) describe the boundaries of the reinvestment zone
101	101	with sufficient definiteness to identify with ordinary and
102	102	reasonable certainty the area included in the reinvestment zone;
103	103	(3) contain findings that:
104	104	(A) the designation of the reinvestment zone will
105	105	be reasonably likely to encourage development or redevelopment and
106	106	improvement of property in the reinvestment zone; and
107	107	(B) the area meets the eligibility requirements
108	108	prescribed by Section 93.0051; and
109	109	(4) include any other information the commission
110	110	considers necessary to administer the designations made under this
111	111	section.
112	112	(c) The commission may not issue an order under this section
113	113	until the commission has conducted a public hearing on the
114	114	designations at which members of the public are given the
115	115	opportunity to be heard.
116	116	Sec. 93.0054. TRANSFER OF DESIGNATION AS OPERATOR OF
117	117	RECORD. (a) The designation of a person as an operator of record
118	118	under Section 93.0053 may be transferred to another person only if
119	119	the transfer is approved by written order of the commission.
120	120	(b) If the commission approves the transfer of a designation
121	121	under this section, the commission must by order designate the
122	122	person to which the designation is transferred as the operator of
123	123	record for the applicable enhanced recovery reinvestment zone.
124	124	Sec. 93.0055. CERTIFICATION OF DESIGNATIONS TO
125	125	COMPTROLLER. (a) The commission shall certify to the comptroller
126	126	each designation made by the commission under Sections 93.0053 and
127	127	93.0054.
128	128	(b) The commission must make each certification to the
129	129	comptroller in writing not later than the seventh day after the date
130	130	the commission issues the order making the designation.
131	131	Sec. 93.0056. CENTRAL REGISTRY OF DESIGNATIONS. The
132	132	commission shall maintain a central registry that includes for each
133	133	enhanced recovery reinvestment zone designated by the commission:
134	134	(1) the name of the reinvestment zone;
135	135	(2) the name of the operator of record for the
136	136	reinvestment zone;
137	137	(3) the name of the tertiary recovery project for the
138	138	reinvestment zone;
139	139	(4) each political subdivision that has adopted a tax
140	140	benefit under Subchapter C that may be claimed by the operator of
141	141	record in the reinvestment zone; and
142	142	(5) any other information the commission considers
143	143	relevant and important.
144	144	Sec. 93.0057. EXPIRATION OF DESIGNATIONS. (a) Except as
145	145	provided by Subsection (b), a designation made by the commission
146	146	under Section 93.0053 or 93.0054 related to an enhanced recovery
147	147	reinvestment zone expires on the earlier of:
148	148	(1) the 10th anniversary of the date the commission
149	149	adopts the order designating the reinvestment zone; or
150	150	(2) the date that payout occurs regarding the field
151	151	located in the reinvestment zone.
152	152	(b) A designation of an operator of record that is
153	153	transferred as authorized by Section 93.0054 expires on the date
154	154	the commission adopts the order approving the transfer.
155	155	Sec. 93.0058. DESIGNATIONS DO NOT CONSTITUTE UNITIZATION.
156	156	The commission's designation of an enhanced recovery reinvestment
157	157	zone, operator of record for the reinvestment zone, or tertiary
158	158	recovery project for the reinvestment zone do not constitute
159	159	unitization of the field located in the reinvestment zone.
160	160	Sec. 93.0059. COMMISSION RULES. The commission shall adopt
161	161	rules necessary to implement and administer this subchapter. The
162	162	commission shall notify the comptroller of any rules adopted under
163	163	this section.
164	164	SUBCHAPTER C. TAX TREATMENT IN ENHANCED RECOVERY REINVESTMENT ZONE
165	165	Sec. 93.0101. LIMITATION ON APPRAISED VALUE OF ELIGIBLE
166	166	PROPERTY INTEREST. (a) In this section:
167	167	(1) "Eligible property interest" means a property
168	168	interest for which a person is entitled to a limitation on appraised
169	169	value under Subsection (b).
170	170	(2) "Eligible real property" means oil in place that
171	171	is part of the common source of supply of a tertiary recovery
172	172	project designated by the commission under Subchapter B.
173	173	(3) "Hold-harmless appraised value" means the
174	174	appraised value of the undivided or fractional interest in oil in
175	175	place in an area on January 1 of the tax year in which the area is
176	176	designated by the commission as an enhanced recovery reinvestment
177	177	zone and that is owned on that date by the person designated by the
178	178	commission as the first operator of record for the reinvestment
179	179	zone.
180	180	(4) "Property interest" means a person's undivided or
181	181	fractional interest in eligible real property.
182	182	(b) A person is entitled to receive from a political
183	183	subdivision a limitation on the appraised value of a property
184	184	interest owned by a person if:
185	185	(1) the person is designated by the commission under
186	186	Section 93.0053 or 93.0054 as the operator of record for an enhanced
187	187	recovery reinvestment zone;
188	188	(2) the property interest is an interest in eligible
189	189	real property located in the reinvestment zone; and
190	190	(3) the limitation is adopted by the governing body of
191	191	the political subdivision in the manner provided by law for
192	192	official action by the governing body.
193	193	(c) The amount of the limitation on appraised value that a
194	194	person is entitled to receive under Subsection (b) for a tax year is
195	195	the amount by which the appraised value of the eligible property
196	196	interest exceeds the hold-harmless appraised value applicable to
197	197	the enhanced recovery reinvestment zone.
198	198	(d) A person who is entitled to receive a limitation on
199	199	appraised value from a political subdivision is entitled to receive
200	200	the limitation for each tax year:
201	201	(1) beginning on or after:
202	202	(A) the date the commission designates the
203	203	applicable enhanced recovery reinvestment zone; or
204	204	(B) a date agreed to by the person and the
205	205	political subdivision after the date the commission designates the
206	206	applicable reinvestment zone; and
207	207	(2) ending on December 31 of the tax year in which the
208	208	reinvestment zone expires.
209	209	(e) The governing body of a political subdivision that
210	210	adopts a limitation on appraised value may not repeal the adoption
211	211	of the limitation until the date the applicable enhanced recovery
212	212	reinvestment zone expires.
213	213	(f) The governing body of a political subdivision may
214	214	require a person to enter into a written agreement with the
215	215	political subdivision before the political subdivision adopts a
216	216	limitation on appraised value of the person's property interest.
217	217	The agreement may include:
218	218	(1) a requirement that the limitation is conditioned
219	219	on a positive production response from the applicable tertiary
220	220	recovery project at a certain rate or after a certain date; and
221	221	(2) any other provision agreed to regarding the
222	222	limitation that is not inconsistent with a provision of this
223	223	chapter or other law.
224	224	(g) Not later than the 15th day after the date the governing
225	225	body of a political subdivision adopts a limitation on appraised
226	226	value, the governing body must notify the comptroller and the chief
227	227	appraiser of each appraisal district established in a county in
228	228	which both the applicable enhanced recovery reinvestment zone and
229	229	the political subdivision are located of the governing body's
230	230	adoption of the limitation. The governing body must include with
231	231	the notification any written agreement entered into under
232	232	Subsection (f).
233	233	Sec. 93.0102. SALES AND USE TAXES REFUND. (a) On or after
234	234	the second anniversary of the date an enhanced recovery
235	235	reinvestment zone is designated by the commission under Section
236	236	93.0053, a person may apply for a refund of the taxes imposed by
237	237	Chapter 151, Tax Code, on the sale or use of a taxable item if:
238	238	(1) the taxable item was sold to or used by a person
239	239	designated by the commission under Section 93.0053 or 93.0054 as
240	240	the operator of record for the reinvestment zone;
241	241	(2) the person claiming the refund is the current
242	242	operator of record designated by the commission for the
243	243	reinvestment zone;
244	244	(3) the sale or use occurs on or after the date the
245	245	commission designates the reinvestment zone and before the second
246	246	anniversary of that date;
247	247	(4) the taxable item was directly used or consumed
248	248	exclusively in the active operation of the tertiary recovery
249	249	project located in the reinvestment zone; and
250	250	(5) there was a positive production response as the
251	251	result of active operations of the tertiary recovery project before
252	252	the second anniversary of the date the commission designates the
253	253	reinvestment zone.
254	254	(b) A person is eligible for a refund of the taxes imposed by
255	255	a political subdivision under Subtitle C, Title 3, Tax Code, on the
256	256	sale or use of a taxable item if:
257	257	(1) the person is eligible for a refund of state taxes
258	258	in relation to the taxable item under Subsection (a); and
259	259	(2) the governing body of the political subdivision
260	260	authorizes the person to receive refunds of the political
261	261	subdivision's taxes in the manner provided by law for official
262	262	action by the governing body not later than the 30th day after the
263	263	date the commission designates the applicable enhanced recovery
264	264	reinvestment zone.
265	265	(c) The governing body of a political subdivision that
266	266	authorizes a refund of sales and use taxes under Subsection (b) may
267	267	not repeal the authorization.
268	268	(d) Not later than the 15th day after the date the governing
269	269	body of a political subdivision authorizes a refund of sales and use
270	270	taxes under Subsection (b), the governing body must notify the
271	271	comptroller in writing of the authorization.
272	272	(e) A person must apply to the comptroller to receive a
273	273	refund of state taxes under Subsection (a).
274	274	(f) The comptroller may require a person or political
275	275	subdivision to provide any information necessary to administer this
276	276	section, including a monthly accounting of the sales and use taxes
277	277	paid by the person that are eligible for a refund under this section
278	278	and proof that there has been a positive production response as
279	279	required by this section.
280	280	Sec. 93.0103. SALES AND USE TAXES EXEMPTION. (a) The sale
281	281	or use of a taxable item is exempt from the taxes imposed by Chapter
282	282	151, Tax Code, if:
283	283	(1) the taxable item is sold to or used by a person
284	284	designated by the commission under Section 93.0053 or 93.0054 as
285	285	the operator of record for an enhanced recovery reinvestment zone;
286	286	(2) the sale or use occurs on or after the second
287	287	anniversary of the date the commission designates the reinvestment
288	288	zone and before the date the reinvestment zone expires;
289	289	(3) the taxable item will be directly used or consumed
290	290	exclusively in the active operation of the tertiary recovery
291	291	project located in the reinvestment zone; and
292	292	(4) there was a positive production response on
293	293	average during the preceding three months as the result of active
294	294	operations of the tertiary recovery project.
295	295	(b) The sale or use of a taxable item is exempt from the
296	296	taxes imposed by a political subdivision under Subtitle C, Title 3,
297	297	Tax Code, if:
298	298	(1) the taxable item is exempt from state taxation
299	299	under Subsection (a); and
300	300	(2) the governing body of the political subdivision
301	301	authorizes the exemption in the manner provided by law for official
302	302	action by the governing body not later than the 30th day after the
303	303	date the commission designates the applicable enhanced recovery
304	304	reinvestment zone.
305	305	(c) The governing body of a political subdivision that
306	306	authorizes an exemption of sales and use taxes under Subsection (b)
307	307	may not repeal the authorization until the date the applicable
308	308	enhanced recovery reinvestment zone expires.
309	309	(d) Not later than the 15th day after the date the governing
310	310	body of a political subdivision authorizes an exemption of sales
311	311	and use taxes under Subsection (b), the governing body must notify
312	312	the comptroller in writing of the authorization.
313	313	Sec. 93.0104. OIL PRODUCTION TAX. (a) In this section:
314	314	(1) "Hold-harmless production rate" means the average
315	315	monthly volume of oil produced from a tertiary recovery project for
316	316	the three calendar months preceding the second anniversary of the
317	317	date the commission designated the project under this chapter.
318	318	(2) "Incremental production" means the volume of oil
319	319	produced from a tertiary recovery project in excess of the
320	320	applicable hold-harmless production rate.
321	321	(b) The incremental production of oil from a tertiary
322	322	recovery project designated by the commission under this chapter is
323	323	exempt from the taxes imposed under Chapter 202, Tax Code.
324	324	(c) The exemption authorized by this section applies only to
325	325	oil produced from the tertiary recovery project:
326	326	(1) on or after the second anniversary of the date the
327	327	commission designates the tertiary recovery project; and
328	328	(2) not later than the date the enhanced recovery
329	329	reinvestment zone in which the tertiary recovery project is located
330	330	expires.
331	331	Sec. 93.0105. OTHER TAX BENEFITS. This subchapter does not
332	332	limit the eligibility of a person for any other available tax
333	333	benefit.
334	334	Sec. 93.0106. REINVESTMENT OF TAX BENEFITS. (a) An
335	335	operator of record that receives a tax benefit under this
336	336	subchapter must invest an amount equal to the total taxes saved as a
337	337	result of receiving the tax benefits under this subchapter on:
338	338	(1) the development and operation of the applicable
339	339	tertiary recovery project; or
340	340	(2) the administration of the tertiary recovery
341	341	project, including negotiation with mineral, royalty, or working
342	342	interest owners.
343	343	(b) The operator of record responsible for making the
344	344	investment required by this section must invest the required
345	345	amount:
346	346	(1) on or after the date the applicable tertiary
347	347	recovery project is designated by the commission; and
348	348	(2) not later than the date the designation of the
349	349	tertiary recovery project expires.
350	350	(c) An operator of record that receives a tax benefit under
351	351	this subchapter must maintain a complete record of the taxes for
352	352	which the person would have been liable if the person had not been
353	353	entitled to the tax benefit.
354	354	Sec. 93.0107. PROVISION OF INFORMATION TO COMPTROLLER. An
355	355	operator of record designated under Section 93.0053 or 93.0054 must
356	356	provide to the comptroller in the time and manner required by the
357	357	comptroller any information necessary for the comptroller to
358	358	implement and administer this subchapter.
359	359	Sec. 93.0108. COMPTROLLER RULES. (a) The comptroller
360	360	shall adopt rules necessary to implement and administer this
361	361	subchapter.
362	362	(b) An appraisal district must comply with the requirements
363	363	of a rule adopted by the comptroller under this section that applies
364	364	to a limitation on the appraised value of property interest
365	365	authorized by Section 93.0101.
366	366	SECTION 2. A person may not file an application with the
367	367	Railroad Commission of Texas under Section 93.0052, Natural
368	368	Resources Code, as added by this Act, before January 1, 2018.
369	369	SECTION 3. The Railroad Commission of Texas shall adopt
370	370	rules necessary to implement and administer Subchapter B, Chapter
371	371	93, Natural Resources Code, as added by this Act, as soon as
372	372	practicable after the effective date of this Act but not later than
373	373	January 1, 2018.
374	374	SECTION 4. The Railroad Commission of Texas shall prescribe
375	375	the application form required by Section 93.0052, Natural Resources
376	376	Code, as added by this Act, as soon as practicable after the
377	377	effective date of this Act but not later than January 1, 2018.
378	378	SECTION 5. The comptroller of public accounts shall adopt
379	379	rules necessary to implement and administer Subchapter C, Chapter
380	380	93, Natural Resources Code, as added by this Act, as soon as
381	381	practicable after the effective date of this Act but not later than
382	382	January 1, 2018.
383	383	SECTION 6. The changes in law made by this Act do not affect
384	384	tax liability related to an enhanced recovery reinvestment zone, as
385	385	defined by Section 93.0001, Natural Resources Code, as added by
386	386	this Act, that occurs before the date the zone is designated under
387	387	Section 93.0053, Natural Resources Code, as added by this Act. That
388	388	liability continues in effect as if this Act had not been enacted,
389	389	and the former law is continued in effect for the collection of
390	390	taxes due and for civil and criminal enforcement of the liability
391	391	for those taxes.
392	392	SECTION 7. This Act takes effect immediately if it receives
393	393	a vote of two-thirds of all the members elected to each house, as
394	394	provided by Section 39, Article III, Texas Constitution. If this
395	395	Act does not receive the vote necessary for immediate effect, this
396	396	Act takes effect September 1, 2017.