88R7943 CJD-F
	By: King	S.B. No. 1407

	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.