HBA-ATS H.B. 1164 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1164
By: Hawley
Ways & Means
4/8/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, state law requires the State of Texas to collect severance taxes
for each barrel of oil and each Mcf (thousand cubic feet) of gas produced
in the state.  As the price for oil and gas declines, "stripper wells" that
produce minimal amounts of oil or gas are often shut down, and once these
wells are shut down it is often too expensive to commence operations again.
Stripper wells produce nearly 30 percent of all oil in the state.  H.B.
1164 sets forth a quarterly certification determination system that waives
the severance tax imposed on certain oil and gas produced for two years
after the completion of a well if either the monthly average closing price
of gas is below $1.80 per MMBtu (Million Btu) or the monthly average
closing price of oil is below $15 per barrel, as recorded on the New York
Mercantile Exchange. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter B, Chapter 202, Tax Code, by adding Section
202.060, as follows: 

Sec. 202.060.  EXEMPTION FOR OIL FROM CERTAIN WELLS UNDER CERTAIN MARKET
CONDITIONS.  (a) Defines "commission," "qualifying lease," and "spudded." 

(b) Requires the comptroller of public accounts of the State of Texas
(comptroller) to certify the dates that the monthly average closing daily
price of West Texas Intermediate crude oil is below $15 per barrel, as
recorded on the New York Mercantile Exchange (NYMEX) for three consecutive
months. 

(c) Exempts from the severance tax imposed by Chapter 202 (Oil Production
Tax) the oil produced from a well spudded (the initial penetration of the
earth by the drill bit for an oil or gas well under proper permit from the
Railroad Commission of Texas) during a three-month period certified by the
comptroller under Subsection (b).  Establishes the second anniversary after
a well is completed as the date on which the exemption expires. 

(d) Exempts from the severance tax for each calendar month during a
three-month period certified by the comptroller the oil produced from a
qualifying lease. 

(e) Provides that a person filing a report under Chapter 202 must include
the number of barrels of oil purchased or produced during the period
covered by the report that are exempt under this section. 

(f) Entitles a person to a credit against taxes imposed by Chapter 202 for
the amount paid if the tax is paid on a barrel of oil exempt under this
section at the full rate provided by Section 202.052(a) or (b) (Rate of
Tax).  Provides that a person must apply to the comptroller for the credit
not later than the expiration of the applicable period for filing a tax
refund under Section 111.104 (Refunds) in order to receive the credit. 
 
(g) Provides that a person responsible for paying the tax must certify to
the comptroller the month in which the well was spudded in order to qualify
for an exemption under Subsection (c). 

SECTION 2.  Amends Subchapter B, Chapter 201, Tax Code, by adding Section
201.059, as follows: 


Sec. 201.059.  EXEMPTION FOR GAS FROM CERTAIN WELLS UNDER CERTAIN MARKET
CONDITIONS.  (a) Defines "commission," "MCF," "qualifying lease," and
"spudded." 

(b) Requires the comptroller to certify the dates that the monthly average
closing daily price of gas is below $1.80 per MMBtu as recorded on the
NYMEX for three consecutive months. 

(c) Exempts from the severance tax imposed by Chapter 201 the gas produced
from a well spudded during a three-month period certified by the
comptroller under Subsection (b). Establishes the second anniversary after
a well is completed as the date on which the exemption expires. 

(d) Exempts from the severance tax for each calendar month during a
three-month period certified by the comptroller the gas produced from a
qualifying lease. 

(e) Provides that a person filing a report under Chapter 201 must include
the gas purchased or produced during the period covered by the report that
is exempt under this section. 

(f) Entitles a person to a credit against taxes imposed by Chapter 201 for
the amount paid if the tax is paid on gas exempt under this section at the
full rate provided by Section 201.052(a) or (b).  Provides that a person
must apply to the comptroller for the credit not later than the expiration
of the applicable period for filing a tax refund under Section 111.104 in
order to receive the credit. 

(g) Provides that a person responsible for paying the tax must certify to
the comptroller the month in which the well was spudded in order to qualify
for an exemption under Subsection (c). 

SECTION 3.  Effective date: September 1, 1999.
            Makes application of this Act prospective.

SECTION 4.  Emergency clause.