86R5507 CBH/JXC-F
By: Ashby H.B. No. 3067
A BILL TO BE ENTITLED
AN ACT
relating to an oil and gas production tax credit for oil and gas
producers that provide produced water for recycling.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle I, Title 2, Tax Code, is amended by
adding Chapter 207 to read as follows:
CHAPTER 207. TAX CREDIT FOR PROVIDING PRODUCED WATER TO BE RECYCLED
Sec. 207.0001. DEFINITIONS. In this chapter:
(1) "Permit holder" means a person who holds all
federal and state permits required to recycle produced water so
that the water may be discharged into or adjacent to water in the
state.
(2) "Produced water" means water produced in oil or
gas drilling, completion, flowback, or production.
(3) "Producer" has the meaning assigned by Section
201.001 or 202.001, as appropriate.
(4) "Railroad commission" means the Railroad
Commission of Texas.
(5) "Water in the state" has the meaning assigned by
Section 26.001, Water Code.
Sec. 207.0002. TAX CREDIT. (a) A producer is entitled to a
credit against the tax imposed under Chapter 201 or 202, as
applicable, in the amount and under the conditions and limitations
provided by this chapter if:
(1) the producer provides to a permit holder produced
water that has a total dissolved solids concentration of more than
90,000 milligrams per liter;
(2) the permit holder recycles the produced water so
that the water may be discharged into or adjacent to water in the
state or sold, regardless of whether the water is actually
discharged or is sold, and complies with any federal and state
permit requirements for recycling the produced water; and
(3) the resulting fresh water meets standards for
discharge into water in the state under the federal National
Pollutant Discharge Elimination System program and the permit
holder complies with any state or federal requirements for testing
and reporting the quality of the water before discharge.
(b) Except as provided by Section 207.0003, the total amount
of the credit under this chapter for a reporting period is computed
by:
(1) determining the total number of barrels of
produced water described by Subsection (a) provided to a permit
holder during the reporting period that is subsequently recycled
during that period;
(2) multiplying the number of barrels determined under
Subdivision (1) by the monthly average closing price of a barrel of
West Texas Intermediate crude oil as recorded on the New York
Mercantile Exchange (NYMEX); and
(3) multiplying the amount determined under
Subdivision (2) by:
(A) 3.75 percent if the credit is claimed under
Chapter 201; or
(B) 2.3 percent if the credit is claimed under
Chapter 202.
(c) Produced water provided to a permit holder may be
counted only once in determining the amount of a credit. Only one
producer may claim a credit for the same produced water.
Sec. 207.0003. LIMITATION ON CREDIT AMOUNT. (a) Except as
provided by Subsection (b), the total amount of credits that may be
claimed under this chapter each state fiscal year may not exceed $25
million.
(b) If in the first year of a state fiscal biennium the
amount claimed under this chapter is less than $25 million, the
amount of credits that may be claimed in the second year of the
state fiscal biennium is equal to the sum of:
(1) $25 million; and
(2) the difference between $25 million and the amount
of credits claimed in the first state fiscal year.
(c) Each month, the comptroller shall post on the
comptroller's Internet website the amount of unclaimed credit
remaining for the state fiscal year.
(d) The comptroller by rule shall prescribe procedures by
which the comptroller may allocate credits if the limit prescribed
by Subsection (a) is reached before the end of the state fiscal
year.
Sec. 207.0004. PERMIT HOLDER REQUIREMENTS; MONTHLY REPORT.
The railroad commission shall adopt a registration process for
permit holders who participate in the program established by this
chapter. Each registered permit holder shall submit to the
railroad commission a monthly report that includes, for the
preceding month:
(1) the metered volume in gallons of produced water
the permit holder received from each producer and recycled;
(2) the total dissolved solids concentration of the
produced water received from each producer before recycling; and
(3) the volume of recycled water discharged into water
in the state or sold.
Sec. 207.0005. CERTIFICATION. (a) To be eligible for the
credit under this chapter, the producer must apply to the railroad
commission for certification that:
(1) the producer has, during the reporting period,
provided to a permit holder produced water that has a total
dissolved solids concentration of more than 90,000 milligrams per
liter; and
(2) the permit holder recycled the water during the
reporting period.
(b) The producer shall include with the certificate
application any information the railroad commission determines is
necessary to certify eligibility for the credit and the amount of
the credit, including information sufficient for the railroad
commission to identify:
(1) the metered volume in gallons of produced water
provided to a permit holder for which the producer intends to claim
a credit; and
(2) the total dissolved solids concentration of that
metered volume of produced water.
(c) The railroad commission shall consider the information
provided by the permit holder under Section 207.0004 in determining
whether to certify eligibility for the credit and the amount of the
credit.
(d) If the producer and permit holder provide sufficient
information under this section and Section 207.0004, the railroad
commission shall issue a certificate of eligibility to the
producer. The certificate must include:
(1) the information the permit holder is required to
provide under Section 207.0004; and
(2) the information the producer is required to
provide under Subsection (b) of this section.
(e) The railroad commission shall immediately notify the
comptroller in writing if the railroad commission:
(1) determines that a producer that previously
received a certificate under this section was not eligible for the
certified credit or is no longer eligible to receive the certified
credit; or
(2) takes any action or discovers any information that
affects the eligibility of the producer for a credit.
Sec. 207.0006. APPLICATION. (a) To claim the credit under
this chapter, the person responsible for paying the tax imposed
under Chapter 201 or 202, as appropriate, must apply to the
comptroller.
(b) The application must include a copy of the certificate
issued by the railroad commission under Section 207.0005 for the
reporting period and any other information required by the
comptroller to sufficiently demonstrate that the producer is
eligible for the credit and the amount of the credit.
(c) In addition to the information required by Subsection
(b), the comptroller may require additional information on a report
required under Subchapter E, Chapter 201, or Subchapter E, Chapter
202.
(d) The comptroller shall approve the application of a
person who demonstrates that the recycled water is eligible for the
credit.
Sec. 207.0007. RULES. The comptroller and the railroad
commission shall adopt rules necessary to implement this chapter.
SECTION 2. Chapter 207, Tax Code, as added by this Act,
applies only to produced water provided to a permit holder, as
described by Chapter 207, Tax Code, as added by this Act, on or
after the effective date of this Act. Produced water provided
before the effective date of this Act is subject to the law in
effect when the produced water was provided, and that law is
continued in effect for that purpose.
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 September 1, 2019.