88R7943 CJD-F
By: Darby H.B. No. 2056
A BILL TO BE ENTITLED
AN ACT
relating to a severance tax exemption for oil and gas produced from
certain restimulation wells; providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 202, Tax Code, is amended
by adding Section 202.062 to read as follows:
Sec. 202.062. TAX EXEMPTION FOR OIL AND GAS PRODUCED FROM
RESTIMULATION WELLS. (a) In this section:
(1) "Commission" means the Railroad Commission of
Texas.
(2) "Consecutive months" means months in consecutive
order, regardless of whether an oil or gas well produces
hydrocarbons during any or all of those months.
(3) "Hydrocarbons" means the oil, gas, condensate, and
other hydrocarbons produced from an oil or gas well.
(4) "Operator" means the person responsible for the
actual physical operation of an oil or gas well.
(5) "Qualifying well" means a restimulation well that
has been certified by the commission under this section as a
qualifying well.
(6) "Restimulation costs" means expenses that are
directly attributable to payment for the restimulation treatment
performed on a restimulation well.
(7) "Restimulation treatment" means the treatment of
an oil or gas well with an application of fluid under pressure for
the purpose of initiating or propagating fractures in a target
geologic formation to enhance the production of hydrocarbons from
the well.
(8) "Restimulation well" means a previously completed
oil or gas well that:
(A) is classified by the commission as a marginal
well, as described by Section 85.122, Natural Resources Code, or a
marginal gas well, as defined by Section 86.091, Natural Resources
Code; and
(B) following production of hydrocarbons,
received a restimulation treatment.
(b) This section does not apply to an oil or gas well that:
(1) has less than 60 months of production reported to
the commission before the date a restimulation treatment is
performed;
(2) is part of an enhanced oil recovery project, as
defined by Section 89.002, Natural Resources Code; or
(3) is drilled but not completed and that does not have
a record of hydrocarbon production reported to the commission.
(c) Hydrocarbons produced from a qualifying well are exempt
from the taxes imposed by Chapter 201 and this chapter until the
earlier of:
(1) the last day of the 60th consecutive month
following the month in which the well first produces hydrocarbons
after a restimulation treatment is completed; or
(2) the date on which the cumulative amount of taxes
exempted under Chapter 201 and this chapter and any credit under
Subsection (l) equals:
(A) if the qualifying well is a restimulation
well, 50 percent of the restimulation costs described by Subsection
(j); or
(B) if the qualifying well is a restimulation
well on which the restimulation treatment was performed using
hydraulic fracturing pumps powered exclusively by electricity or
natural gas, 75 percent of the restimulation costs described by
Subsection (j).
(d) Notwithstanding Section 201.057, gas produced from a
qualifying well that was previously certified by the commission as
a well that produces or will produce high-cost gas is not eligible
for the tax reduction provided by that section during the period the
gas is exempt from tax under Subsection (c) of this section.
(e) The operator of a restimulation well may apply to the
commission for certification that the well is a qualifying well.
The application may be made at any time after the first day the well
produces hydrocarbons following the date a restimulation treatment
is completed. The commission may require an applicant to provide
any relevant information required to administer this section.
(f) If the commission approves an application submitted
under Subsection (e), the commission shall issue a certificate
designating the well as a qualifying well and specifying whether
the restimulation treatment was performed using hydraulic
fracturing pumps powered exclusively by electricity or natural gas.
(g) The commission may revoke a certificate issued under
Subsection (f) if the commission determines that:
(1) a well that was certified as a qualifying well is
not a restimulation well;
(2) if the certificate specifies that the
restimulation treatment was performed on a qualifying well using
hydraulic fracturing pumps powered exclusively by electricity or
natural gas, the restimulation treatment was performed using a
method other than the method specified in the certificate; or
(3) the operator is claiming or has claimed an
exemption under this section for hydrocarbons produced from a well
that is not a qualifying well.
(h) The commission shall notify an operator that a
certificate issued under Subsection (f) has been revoked. An
exemption provided by this section is automatically revoked on the
date the commission revokes a certificate unless the commission
issues a new certificate for the well. Hydrocarbons produced from
the well after the date a certificate is revoked are not eligible
for the exemption provided by this section.
(i) To qualify for the exemption provided by this section,
the person responsible for paying the tax must apply to the
comptroller. The comptroller shall determine the form and content
of the application, which must include:
(1) the certificate issued by the commission under
Subsection (f); and
(2) a report of the restimulation costs incurred to
perform the restimulation treatment on the qualifying well from
which the hydrocarbons that are the subject of the application are
produced.
(j) For the purposes of Subsection (i)(2), restimulation
costs include only the current and contemporaneous restimulation
costs associated with performing the restimulation treatment.
(k) The comptroller shall approve an application for an
exemption provided by this section if the application meets the
requirements of this section. The comptroller may require the
person applying for the exemption to provide any relevant
information necessary to administer this section. The comptroller
by rule may establish procedures to comply with this section.
(l) If the tax imposed under Chapter 201 or this chapter, as
applicable, is paid at the applicable rate on hydrocarbons produced
from a qualifying well on or after the date the commission issues a
certificate for the well under Subsection (f) but before the date
the comptroller approves an application for an exemption for
hydrocarbons produced from the well under Subsection (k), the
person responsible for paying the tax is entitled to a credit
against the taxes due under Chapter 201 or this chapter in an amount
equal to the amount of tax paid during that period on hydrocarbons
produced from the qualifying well. To receive the credit, the
person responsible for paying the tax must apply to the comptroller
before the expiration of the applicable period for filing a tax
refund claim under Section 111.104.
(m) A person who makes or submits an application, report, or
other document or item of information to the commission or the
comptroller under this section that the person knows is false or
untrue in a material fact is subject to the penalties imposed by
Chapters 85 and 91, Natural Resources Code.
(n) A person who applies or attempts to apply for an
exemption under this section for hydrocarbons produced from a well
the person knows is not a qualifying well is liable to the state for
a civil penalty. The amount of the penalty may not exceed the sum
of:
(1) $10,000; and
(2) the difference between the amount of taxes paid or
attempted to be paid and the amount of taxes due.
(o) The attorney general may recover a penalty under
Subsection (n) in a suit brought on behalf of the state. Venue for
the suit is in Travis County.
(p) The commission may adopt rules necessary to administer
this section.
SECTION 2. Section 202.062, Tax Code, as added by this Act,
applies only to hydrocarbons produced on or after January 1, 2024.
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 January 1, 2024.