| 1 | 1 | | 87R8711 SMH-F |
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| 2 | 2 | | By: Landgraf H.B. No. 2292 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the appraisal for ad valorem tax purposes of a real |
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| 8 | 8 | | property interest in oil or gas in place. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 23.175, Tax Code, is amended to read as |
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| 11 | 11 | | follows: |
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| 12 | 12 | | Sec. 23.175. OIL OR GAS INTEREST. (a) If a real property |
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| 13 | 13 | | interest in oil or gas in place is appraised by a method that takes |
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| 14 | 14 | | into account the future income from the sale of oil or gas to be |
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| 15 | 15 | | produced from the interest, the method must use the average price of |
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| 16 | 16 | | the oil or gas from the interest for the preceding two calendar |
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| 17 | 17 | | years [year multiplied by a price adjustment factor] as the price at |
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| 18 | 18 | | which the oil or gas produced from the interest is projected to be |
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| 19 | 19 | | sold in each calendar [the current] year of the appraisal. The |
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| 20 | 20 | | average price for the preceding two calendar years [year] is |
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| 21 | 21 | | calculated by dividing the sum of the monthly average prices for |
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| 22 | 22 | | which oil and gas from the interest was selling during each month of |
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| 23 | 23 | | the preceding two calendar years [year] by 24 [12]. If there was no |
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| 24 | 24 | | production of oil or gas from the interest during any month of the |
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| 25 | 25 | | preceding two calendar years [year], the average price for which |
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| 26 | 26 | | similar oil and gas from comparable interests was selling during |
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| 27 | 27 | | that month is to be used. [Except as otherwise provided by this |
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| 28 | 28 | | subsection, the chief appraiser shall calculate the price |
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| 29 | 29 | | adjustment factor by dividing the spot price of West Texas |
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| 30 | 30 | | Intermediate crude oil in nominal dollars per barrel or the spot |
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| 31 | 31 | | price of natural gas at the Henry Hub in nominal dollars per million |
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| 32 | 32 | | British thermal units, as applicable, as projected for the current |
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| 33 | 33 | | calendar year by the United States Energy Information |
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| 34 | 34 | | Administration in the most recently published edition of the Annual |
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| 35 | 35 | | Energy Outlook by the spot price of West Texas Intermediate crude |
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| 36 | 36 | | oil in nominal dollars per barrel or the spot price of natural gas |
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| 37 | 37 | | at the Henry Hub in nominal dollars per million British thermal |
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| 38 | 38 | | units, as applicable, for the preceding calendar year as stated in |
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| 39 | 39 | | the same report. If as of March 1 of the current calendar year the |
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| 40 | 40 | | most recently published edition of the Annual Energy Outlook was |
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| 41 | 41 | | published before December 1 of the preceding calendar year, the |
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| 42 | 42 | | chief appraiser shall use the projected current and preceding |
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| 43 | 43 | | calendar year spot price of West Texas Intermediate crude oil in |
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| 44 | 44 | | nominal dollars per barrel or the spot price of natural gas at the |
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| 45 | 45 | | Henry Hub in nominal dollars per million British thermal units, as |
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| 46 | 46 | | applicable, as stated in the Short-Term Energy Outlook report |
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| 47 | 47 | | published in January of the current calendar year by the United |
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| 48 | 48 | | States Energy Information Administration in the price adjustment |
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| 49 | 49 | | factor calculations. The price for the interest used in the second |
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| 50 | 50 | | through the sixth calendar year of the appraisal may not reflect an |
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| 51 | 51 | | annual escalation or de-escalation rate that exceeds the average |
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| 52 | 52 | | annual percentage change from 1982 to the most recent year for which |
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| 53 | 53 | | the information is available in the producer price index for |
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| 54 | 54 | | domestically produced petroleum or for natural gas, as applicable, |
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| 55 | 55 | | as published by the Bureau of Labor Statistics of the United States |
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| 56 | 56 | | Department of Labor. The price for the interest used in the sixth |
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| 57 | 57 | | calendar year of the appraisal must be used in each subsequent year |
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| 58 | 58 | | of the appraisal.] |
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| 59 | 59 | | (b) The comptroller by rule shall develop and distribute to |
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| 60 | 60 | | each appraisal office appraisal manuals that specify the [formula |
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| 61 | 61 | | to be used in computing the limit on the price for an interest used |
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| 62 | 62 | | in the second through the sixth year of an appraisal and the] |
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| 63 | 63 | | methods and procedures to discount future income from the sale of |
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| 64 | 64 | | oil or gas from the interest to present value. |
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| 65 | 65 | | (c) Each appraisal office shall use the [formula,] |
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| 66 | 66 | | methods[,] and procedures specified by the appraisal manuals |
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| 67 | 67 | | developed under Subsection (b). |
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| 68 | 68 | | SECTION 2. This Act applies to the appraisal for ad valorem |
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| 69 | 69 | | tax purposes of a real property interest in oil or gas in place only |
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| 70 | 70 | | for a tax year beginning on or after the effective date of this Act. |
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| 71 | 71 | | SECTION 3. This Act takes effect January 1, 2022. |
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