Bill Text: TX HB2621 | 2017-2018 | 85th Legislature | Introduced
Bill Title: Relating to state and local tax incentives for certain enhanced oil recovery projects.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2017-05-03 - Left pending in committee [HB2621 Detail]
Download: Texas-2017-HB2621-Introduced.html
85R2759 TJB-D | ||
By: Darby | H.B. No. 2621 |
|
||
|
||
relating to state and local tax incentives for certain enhanced oil | ||
recovery projects. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subtitle B, Title 3, Natural Resources Code, is | ||
amended by adding Chapter 93 to read as follows: | ||
CHAPTER 93. ENHANCED OIL RECOVERY REINVESTMENT ZONES | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 93.0001. DEFINITIONS. In this chapter: | ||
(1) "Active operation" means the start and | ||
continuation of an injection program for a tertiary recovery | ||
project to enhance the displacement process in a reservoir. | ||
(2) "Commission" means the Railroad Commission of | ||
Texas. | ||
(3) "Common source of supply" means a common reservoir | ||
as defined by Section 86.002. | ||
(4) "Enhanced recovery reinvestment zone" means an | ||
enhanced recovery reinvestment zone designated by the commission | ||
under Subchapter B. | ||
(5) "Operator" means the person responsible for the | ||
actual physical operation of a tertiary recovery project. | ||
(6) "Payout" means the point at which all costs of | ||
leasing, exploring, drilling, and operating have been recovered | ||
from production of the field as defined by contract. | ||
(7) "Positive production response" means that the rate | ||
of oil production from the wells affected by a tertiary recovery | ||
project is greater than the rate that would have occurred without | ||
the project. | ||
(8) "Tertiary recovery method" means a tertiary | ||
recovery method listed in the federal June 1979 energy regulations | ||
referred to in Section 4993, Internal Revenue Code of 1986, or | ||
approved by the United States secretary of the treasury for | ||
purposes of administering Section 4993, Internal Revenue Code of | ||
1986, immediately before that section was repealed. | ||
(9) "Tertiary recovery project" means the use of any | ||
process for the displacement of oil from the earth using a tertiary | ||
recovery method, including the use of an immiscible, miscible, | ||
chemical, thermal, or biological process. | ||
SUBCHAPTER B. DESIGNATION OF ENHANCED RECOVERY REINVESTMENT ZONE | ||
Sec. 93.0051. ELIGIBILITY OF AREA FOR DESIGNATION AS | ||
REINVESTMENT ZONE. An area is eligible to be designated as an | ||
enhanced recovery reinvestment zone if: | ||
(1) the area comprises a single field: | ||
(A) identified through geologic studies on file | ||
with the Bureau of Economic Geology or the United States Department | ||
of Energy; and | ||
(B) that encompasses a Cenozoic Era common source | ||
of supply; | ||
(2) a person is ready to begin active operations of a | ||
tertiary recovery project in the area; | ||
(3) the single field is projected to have a positive | ||
production response as the result of active operations of the | ||
tertiary recovery project not later than the second anniversary of | ||
the date the commission designates the area as an enhanced recovery | ||
reinvestment zone; and | ||
(4) the designation of the area will be reasonably | ||
likely to encourage development or redevelopment and improvement of | ||
property in the reinvestment zone. | ||
Sec. 93.0052. APPLICATION FOR DESIGNATION OF REINVESTMENT | ||
ZONE, OPERATOR OF RECORD, AND TERTIARY RECOVERY PROJECT. (a) A | ||
person may file an application with the commission requesting the | ||
commission to designate: | ||
(1) an area that meets the eligibility requirements of | ||
Section 93.0051 as an enhanced recovery reinvestment zone; | ||
(2) the person as the operator of record of the | ||
tertiary recovery project for the reinvestment zone; and | ||
(3) the tertiary recovery project located in the | ||
reinvestment zone and operated by the person as the tertiary | ||
recovery project for the reinvestment zone. | ||
(b) The person must submit the application on a form | ||
prescribed by the commission. The person must submit with the | ||
application any information required by the commission to assist | ||
the commission in making each designation described by Subsection | ||
(a). | ||
(c) The commission by rule shall prescribe the form of the | ||
application described by this section. | ||
Sec. 93.0053. DESIGNATION OF REINVESTMENT ZONE, OPERATOR OF | ||
RECORD, AND TERTIARY RECOVERY PROJECT. (a) The commission by order | ||
may designate: | ||
(1) an area as an enhanced recovery reinvestment zone | ||
if: | ||
(A) a person files an application under Section | ||
93.0052; and | ||
(B) the commission finds that the area meets the | ||
eligibility requirements prescribed by Section 93.0051; | ||
(2) the person that submitted the application as the | ||
operator of record of the tertiary recovery project for the | ||
reinvestment zone; and | ||
(3) the tertiary recovery project located in the | ||
reinvestment zone and operated by the person as the tertiary | ||
recovery project for the reinvestment zone. | ||
(b) An order designating an area as an enhanced recovery | ||
reinvestment zone must: | ||
(1) make each designation described by Subsection (a); | ||
(2) describe the boundaries of the reinvestment zone | ||
with sufficient definiteness to identify with ordinary and | ||
reasonable certainty the area included in the reinvestment zone; | ||
(3) contain findings that: | ||
(A) the designation of the reinvestment zone will | ||
be reasonably likely to encourage development or redevelopment and | ||
improvement of property in the reinvestment zone; and | ||
(B) the area meets the eligibility requirements | ||
prescribed by Section 93.0051; and | ||
(4) include any other information the commission | ||
considers necessary to administer the designations made under this | ||
section. | ||
(c) The commission may not issue an order under this section | ||
until the commission has conducted a public hearing on the | ||
designations at which members of the public are given the | ||
opportunity to be heard. | ||
Sec. 93.0054. TRANSFER OF DESIGNATION AS OPERATOR OF | ||
RECORD. (a) The designation of a person as an operator of record | ||
under Section 93.0053 may be transferred to another person only if | ||
the transfer is approved by written order of the commission. | ||
(b) If the commission approves the transfer of a designation | ||
under this section, the commission must by order designate the | ||
person to which the designation is transferred as the operator of | ||
record for the applicable enhanced recovery reinvestment zone. | ||
Sec. 93.0055. CERTIFICATION OF DESIGNATIONS TO | ||
COMPTROLLER. (a) The commission shall certify to the comptroller | ||
each designation made by the commission under Sections 93.0053 and | ||
93.0054. | ||
(b) The commission must make each certification to the | ||
comptroller in writing not later than the seventh day after the date | ||
the commission issues the order making the designation. | ||
Sec. 93.0056. CENTRAL REGISTRY OF DESIGNATIONS. The | ||
commission shall maintain a central registry that includes for each | ||
enhanced recovery reinvestment zone designated by the commission: | ||
(1) the name of the reinvestment zone; | ||
(2) the name of the operator of record for the | ||
reinvestment zone; | ||
(3) the name of the tertiary recovery project for the | ||
reinvestment zone; | ||
(4) each political subdivision that has adopted a tax | ||
benefit under Subchapter C that may be claimed by the operator of | ||
record in the reinvestment zone; and | ||
(5) any other information the commission considers | ||
relevant and important. | ||
Sec. 93.0057. EXPIRATION OF DESIGNATIONS. (a) Except as | ||
provided by Subsection (b), a designation made by the commission | ||
under Section 93.0053 or 93.0054 related to an enhanced recovery | ||
reinvestment zone expires on the earlier of: | ||
(1) the 10th anniversary of the date the commission | ||
adopts the order designating the reinvestment zone; or | ||
(2) the date that payout occurs regarding the field | ||
located in the reinvestment zone. | ||
(b) A designation of an operator of record that is | ||
transferred as authorized by Section 93.0054 expires on the date | ||
the commission adopts the order approving the transfer. | ||
Sec. 93.0058. DESIGNATIONS DO NOT CONSTITUTE UNITIZATION. | ||
The commission's designation of an enhanced recovery reinvestment | ||
zone, operator of record for the reinvestment zone, or tertiary | ||
recovery project for the reinvestment zone do not constitute | ||
unitization of the field located in the reinvestment zone. | ||
Sec. 93.0059. COMMISSION RULES. The commission shall adopt | ||
rules necessary to implement and administer this subchapter. The | ||
commission shall notify the comptroller of any rules adopted under | ||
this section. | ||
SUBCHAPTER C. TAX TREATMENT IN ENHANCED RECOVERY REINVESTMENT ZONE | ||
Sec. 93.0101. LIMITATION ON APPRAISED VALUE OF ELIGIBLE | ||
PROPERTY INTEREST. (a) In this section: | ||
(1) "Eligible property interest" means a property | ||
interest for which a person is entitled to a limitation on appraised | ||
value under Subsection (b). | ||
(2) "Eligible real property" means oil in place that | ||
is part of the common source of supply of a tertiary recovery | ||
project designated by the commission under Subchapter B. | ||
(3) "Hold-harmless appraised value" means the | ||
appraised value of the undivided or fractional interest in oil in | ||
place in an area on January 1 of the tax year in which the area is | ||
designated by the commission as an enhanced recovery reinvestment | ||
zone and that is owned on that date by the person designated by the | ||
commission as the first operator of record for the reinvestment | ||
zone. | ||
(4) "Property interest" means a person's undivided or | ||
fractional interest in eligible real property. | ||
(b) A person is entitled to receive from a political | ||
subdivision a limitation on the appraised value of a property | ||
interest owned by a person if: | ||
(1) the person is designated by the commission under | ||
Section 93.0053 or 93.0054 as the operator of record for an enhanced | ||
recovery reinvestment zone; | ||
(2) the property interest is an interest in eligible | ||
real property located in the reinvestment zone; and | ||
(3) the limitation is adopted by the governing body of | ||
the political subdivision in the manner provided by law for | ||
official action by the governing body. | ||
(c) The amount of the limitation on appraised value that a | ||
person is entitled to receive under Subsection (b) for a tax year is | ||
the amount by which the appraised value of the eligible property | ||
interest exceeds the hold-harmless appraised value applicable to | ||
the enhanced recovery reinvestment zone. | ||
(d) A person who is entitled to receive a limitation on | ||
appraised value from a political subdivision is entitled to receive | ||
the limitation for each tax year: | ||
(1) beginning on or after: | ||
(A) the date the commission designates the | ||
applicable enhanced recovery reinvestment zone; or | ||
(B) a date agreed to by the person and the | ||
political subdivision after the date the commission designates the | ||
applicable reinvestment zone; and | ||
(2) ending on December 31 of the tax year in which the | ||
reinvestment zone expires. | ||
(e) The governing body of a political subdivision that | ||
adopts a limitation on appraised value may not repeal the adoption | ||
of the limitation until the date the applicable enhanced recovery | ||
reinvestment zone expires. | ||
(f) The governing body of a political subdivision may | ||
require a person to enter into a written agreement with the | ||
political subdivision before the political subdivision adopts a | ||
limitation on appraised value of the person's property interest. | ||
The agreement may include: | ||
(1) a requirement that the limitation is conditioned | ||
on a positive production response from the applicable tertiary | ||
recovery project at a certain rate or after a certain date; and | ||
(2) any other provision agreed to regarding the | ||
limitation that is not inconsistent with a provision of this | ||
chapter or other law. | ||
(g) Not later than the 15th day after the date the governing | ||
body of a political subdivision adopts a limitation on appraised | ||
value, the governing body must notify the comptroller and the chief | ||
appraiser of each appraisal district established in a county in | ||
which both the applicable enhanced recovery reinvestment zone and | ||
the political subdivision are located of the governing body's | ||
adoption of the limitation. The governing body must include with | ||
the notification any written agreement entered into under | ||
Subsection (f). | ||
Sec. 93.0102. SALES AND USE TAXES REFUND. (a) On or after | ||
the second anniversary of the date an enhanced recovery | ||
reinvestment zone is designated by the commission under Section | ||
93.0053, a person may apply for a refund of the taxes imposed by | ||
Chapter 151, Tax Code, on the sale or use of a taxable item if: | ||
(1) the taxable item was sold to or used by a person | ||
designated by the commission under Section 93.0053 or 93.0054 as | ||
the operator of record for the reinvestment zone; | ||
(2) the person claiming the refund is the current | ||
operator of record designated by the commission for the | ||
reinvestment zone; | ||
(3) the sale or use occurs on or after the date the | ||
commission designates the reinvestment zone and before the second | ||
anniversary of that date; | ||
(4) the taxable item was directly used or consumed | ||
exclusively in the active operation of the tertiary recovery | ||
project located in the reinvestment zone; and | ||
(5) there was a positive production response as the | ||
result of active operations of the tertiary recovery project before | ||
the second anniversary of the date the commission designates the | ||
reinvestment zone. | ||
(b) A person is eligible for a refund of the taxes imposed by | ||
a political subdivision under Subtitle C, Title 3, Tax Code, on the | ||
sale or use of a taxable item if: | ||
(1) the person is eligible for a refund of state taxes | ||
in relation to the taxable item under Subsection (a); and | ||
(2) the governing body of the political subdivision | ||
authorizes the person to receive refunds of the political | ||
subdivision's taxes in the manner provided by law for official | ||
action by the governing body not later than the 30th day after the | ||
date the commission designates the applicable enhanced recovery | ||
reinvestment zone. | ||
(c) The governing body of a political subdivision that | ||
authorizes a refund of sales and use taxes under Subsection (b) may | ||
not repeal the authorization. | ||
(d) Not later than the 15th day after the date the governing | ||
body of a political subdivision authorizes a refund of sales and use | ||
taxes under Subsection (b), the governing body must notify the | ||
comptroller in writing of the authorization. | ||
(e) A person must apply to the comptroller to receive a | ||
refund of state taxes under Subsection (a). | ||
(f) The comptroller may require a person or political | ||
subdivision to provide any information necessary to administer this | ||
section, including a monthly accounting of the sales and use taxes | ||
paid by the person that are eligible for a refund under this section | ||
and proof that there has been a positive production response as | ||
required by this section. | ||
Sec. 93.0103. SALES AND USE TAXES EXEMPTION. (a) The sale | ||
or use of a taxable item is exempt from the taxes imposed by Chapter | ||
151, Tax Code, if: | ||
(1) the taxable item is sold to or used by a person | ||
designated by the commission under Section 93.0053 or 93.0054 as | ||
the operator of record for an enhanced recovery reinvestment zone; | ||
(2) the sale or use occurs on or after the second | ||
anniversary of the date the commission designates the reinvestment | ||
zone and before the date the reinvestment zone expires; | ||
(3) the taxable item will be directly used or consumed | ||
exclusively in the active operation of the tertiary recovery | ||
project located in the reinvestment zone; and | ||
(4) there was a positive production response on | ||
average during the preceding three months as the result of active | ||
operations of the tertiary recovery project. | ||
(b) The sale or use of a taxable item is exempt from the | ||
taxes imposed by a political subdivision under Subtitle C, Title 3, | ||
Tax Code, if: | ||
(1) the taxable item is exempt from state taxation | ||
under Subsection (a); and | ||
(2) the governing body of the political subdivision | ||
authorizes the exemption in the manner provided by law for official | ||
action by the governing body not later than the 30th day after the | ||
date the commission designates the applicable enhanced recovery | ||
reinvestment zone. | ||
(c) The governing body of a political subdivision that | ||
authorizes an exemption of sales and use taxes under Subsection (b) | ||
may not repeal the authorization until the date the applicable | ||
enhanced recovery reinvestment zone expires. | ||
(d) Not later than the 15th day after the date the governing | ||
body of a political subdivision authorizes an exemption of sales | ||
and use taxes under Subsection (b), the governing body must notify | ||
the comptroller in writing of the authorization. | ||
Sec. 93.0104. OIL PRODUCTION TAX. (a) In this section: | ||
(1) "Hold-harmless production rate" means the average | ||
monthly volume of oil produced from a tertiary recovery project for | ||
the three calendar months preceding the second anniversary of the | ||
date the commission designated the project under this chapter. | ||
(2) "Incremental production" means the volume of oil | ||
produced from a tertiary recovery project in excess of the | ||
applicable hold-harmless production rate. | ||
(b) The incremental production of oil from a tertiary | ||
recovery project designated by the commission under this chapter is | ||
exempt from the taxes imposed under Chapter 202, Tax Code. | ||
(c) The exemption authorized by this section applies only to | ||
oil produced from the tertiary recovery project: | ||
(1) on or after the second anniversary of the date the | ||
commission designates the tertiary recovery project; and | ||
(2) not later than the date the enhanced recovery | ||
reinvestment zone in which the tertiary recovery project is located | ||
expires. | ||
Sec. 93.0105. OTHER TAX BENEFITS. This subchapter does not | ||
limit the eligibility of a person for any other available tax | ||
benefit. | ||
Sec. 93.0106. REINVESTMENT OF TAX BENEFITS. (a) An | ||
operator of record that receives a tax benefit under this | ||
subchapter must invest an amount equal to the total taxes saved as a | ||
result of receiving the tax benefits under this subchapter on: | ||
(1) the development and operation of the applicable | ||
tertiary recovery project; or | ||
(2) the administration of the tertiary recovery | ||
project, including negotiation with mineral, royalty, or working | ||
interest owners. | ||
(b) The operator of record responsible for making the | ||
investment required by this section must invest the required | ||
amount: | ||
(1) on or after the date the applicable tertiary | ||
recovery project is designated by the commission; and | ||
(2) not later than the date the designation of the | ||
tertiary recovery project expires. | ||
(c) An operator of record that receives a tax benefit under | ||
this subchapter must maintain a complete record of the taxes for | ||
which the person would have been liable if the person had not been | ||
entitled to the tax benefit. | ||
Sec. 93.0107. PROVISION OF INFORMATION TO COMPTROLLER. An | ||
operator of record designated under Section 93.0053 or 93.0054 must | ||
provide to the comptroller in the time and manner required by the | ||
comptroller any information necessary for the comptroller to | ||
implement and administer this subchapter. | ||
Sec. 93.0108. COMPTROLLER RULES. (a) The comptroller | ||
shall adopt rules necessary to implement and administer this | ||
subchapter. | ||
(b) An appraisal district must comply with the requirements | ||
of a rule adopted by the comptroller under this section that applies | ||
to a limitation on the appraised value of property interest | ||
authorized by Section 93.0101. | ||
SECTION 2. A person may not file an application with the | ||
Railroad Commission of Texas under Section 93.0052, Natural | ||
Resources Code, as added by this Act, before January 1, 2018. | ||
SECTION 3. The Railroad Commission of Texas shall adopt | ||
rules necessary to implement and administer Subchapter B, Chapter | ||
93, Natural Resources Code, as added by this Act, as soon as | ||
practicable after the effective date of this Act but not later than | ||
January 1, 2018. | ||
SECTION 4. The Railroad Commission of Texas shall prescribe | ||
the application form required by Section 93.0052, Natural Resources | ||
Code, as added by this Act, as soon as practicable after the | ||
effective date of this Act but not later than January 1, 2018. | ||
SECTION 5. The comptroller of public accounts shall adopt | ||
rules necessary to implement and administer Subchapter C, Chapter | ||
93, Natural Resources Code, as added by this Act, as soon as | ||
practicable after the effective date of this Act but not later than | ||
January 1, 2018. | ||
SECTION 6. The changes in law made by this Act do not affect | ||
tax liability related to an enhanced recovery reinvestment zone, as | ||
defined by Section 93.0001, Natural Resources Code, as added by | ||
this Act, that occurs before the date the zone is designated under | ||
Section 93.0053, Natural Resources Code, as added by 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 7. This Act takes effect immediately if it receives | ||
a vote of two-thirds of all the members elected to each house, as | ||
provided by Section 39, Article III, Texas Constitution. If this | ||
Act does not receive the vote necessary for immediate effect, this | ||
Act takes effect September 1, 2017. |