2023 Texas Statutes › Tax Code › Title 2 - State Taxation › Subtitle I - Severance Taxes › Chapter 202 - Oil Production Tax › Subchapter B. Tax Imposed › Section 202.057. Tax Credit for Incremental Production Techniques

Sec. 202.057.  TAX CREDIT FOR INCREMENTAL PRODUCTION TECHNIQUES.  (a)  In this section:
(1)  "Baseline production" means a lease's average monthly production during the four highest months of production in the time period from January 1, 1996, through December 31, 1996.
(2)  "Commission" means the Railroad Commission of Texas.
(3)  "Incremental production" means production from a qualifying lease in excess of the baseline production.
(4)  "Incremental production technique" means any secondary or tertiary production enhancement technique.  For wells in primary production, the use of incremental production techniques means that an expenditure of at least $5,000 must have been made to cause increased production.  Operators must certify to the commission that such expenditure has been made to qualify for the tax exemption.  The incremental production techniques listed in this subdivision must cause incremental production from an existing oil lease or from a newly drilled single-completion well on an existing lease.
(5)  "Incremental ratio" means the amount of a qualifying lease's average monthly incremental production during the four-month period used to meet the definition of a qualifying lease divided by its average monthly total production during the same four-month period.
(6)  "Qualifying lease" means a commission-designated oil lease whose production during the four-month period used in computing the baseline is no more than seven barrels of oil equivalents per day per well, excluding gas flared pursuant to the rules of the commission, and which has shown incremental production for four of five consecutive months on or after September 1, 1997, and after performing an incremental production technique within the lease.  For purposes of qualifying a lease, production per well per day is measured by dividing the sum of lease production during the four highest months of production in the baseline period by the sum of the number of well-days, where a well-day is one well producing for one day.
(7)  "Qualified incremental production" means the lease's monthly total production multiplied by the incremental ratio.
(b)  An operator of a qualifying lease is entitled to a 50 percent tax exemption on that lease's qualified incremental production for five years provided that:
(1)  the incremental production required to define a qualifying lease occurred after September 1, 1997, and before December 31, 1998;
(2)  the operator of a qualifying lease applies to the commission for a determination of a lease's incremental ratio before February 11, 1999;  and
(3)  the operator provides to the comptroller a commission-certified incremental ratio.
(c)  If the comptroller's average taxable price of crude oil reaches $25 per barrel, adjusted to 1997 dollars, for three consecutive months, the tax credit under this section shall be suspended until the price drops below $25 per barrel, adjusted to 1997 dollars, for three consecutive months.
(d)  If the tax is paid at the full rate provided by Section 201.052(a) or (b) or Section 202.052(a) or (b) before the comptroller approves an application for an exemption provided in this chapter, the operator is entitled to a credit against taxes imposed by this chapter in an amount equal to 50 percent of the tax paid on the incremental production.  To receive the credit, the operator must apply to the comptroller for the credit not later than the first anniversary after the date the commission certifies the incremental ratio for a qualifying lease.
(e)  The commission may enact rules necessary to administer the provisions of this section.
Added by Acts 1997, 75th Leg., ch. 1060, Sec. 2, eff. Sept. 1, 1997.
Subsec. (h) of this section provided for the expiration of the section on Sept. 1, 2007.  Subsec. (h) was repealed by Acts 2007, 80th Leg., R.S., Ch. 911 (H.B. 2982), Sec. 4, which was effective January 1, 2008, after the section had expired.