2023 Texas Statutes › Tax Code › Title 2 - State Taxation › Subtitle I - Severance Taxes › Chapter 201 - Gas Production Tax › Subchapter B. Tax Imposed › Section 201.057. Temporary Exemption or Tax Reduction for Certain High-Cost Gas

Sec. 201.057.  TEMPORARY EXEMPTION OR TAX REDUCTION FOR CERTAIN HIGH-COST GAS.  (a)  In this section:
(1)  "Commission" means the Railroad Commission of Texas.
(2)  "High-cost gas" means  high-cost natural gas as described by Section 107, Natural Gas Policy Act of 1978 (15 U.S.C. Section 3317), as that section existed on January 1, 1989, without regard to whether that section is in effect or whether a determination has been made that the gas is high-cost natural gas for purposes of that Act.
(3)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
(4)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
(5)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
(6)  "Operator" means the person responsible for the actual physical operation of an oil or gas well.
(7)  "Consecutive months" means months in consecutive order, regardless of whether or not a well produces oil or gas during any or all such months.
(b)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
(c)  High-cost gas produced from a well that is spudded or completed after August 31, 1996, is entitled to a reduction of the tax imposed by this chapter for the first 120 consecutive calendar months beginning on the first day of production, or until the cumulative value of the tax reduction equals 50 percent of the drilling and completion costs incurred for the well, whichever occurs first.  The amount of tax reduction shall be computed by subtracting from the tax rate imposed by Section 201.052 the product of that tax rate times the ratio of drilling and completion costs incurred for the well to twice the median drilling and completion costs for high-cost wells spudded or completed during the previous state fiscal year, except that the effective rate of tax may not be reduced below zero.
(d)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
(e)  The operator of a proposed or existing gas well, including a gas well that has not been completed, may apply to the commission for certification that the well produces or will produce high-cost gas.  The application may be made at any time after the first day of production.  The application may be made but is not required to be made concurrently with a request for a determination that gas produced from the well is high-cost natural gas for purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.).  The commission may require an applicant to provide the commission with any relevant information required to administer this section.  For purposes of this section, a determination that gas is high-cost natural gas for purposes of the Natural Gas Policy Act of 1978 (15 U.S.C. Section 3301 et seq.) is a certification that the gas is high-cost gas for purposes of this section, and in that event additional certification is not required to qualify for the tax reduction provided by this section.
(f)  To qualify for the tax reduction provided by this section, the person responsible for paying the tax must apply to the comptroller.  The application must contain the certification of the commission that the well produces high-cost gas and must contain a report of drilling and completion costs incurred for each well on a form and in the detail as determined by the comptroller.  Drilling and completion costs for a recompletion shall only include current and contemporaneous costs associated with the recompletion.  Notwithstanding any other provision of this section, to obtain the maximum tax reduction, an application to the comptroller for certification according to Subsection (a)(2) must be filed with the comptroller at the later of the 180th day after the date of first production or the 45th day after the date of approval by the commission.  If the application is not filed by the applicable deadline, the tax reduction is reduced by 10 percent for the period beginning on the 180th day after the first day of production and ending on the date on which the application is filed with the comptroller.   The comptroller shall approve the application of a person who demonstrates that the gas is eligible for the tax reduction.  The comptroller may require a person applying for the tax reduction to provide any relevant information in the person's monthly report that the comptroller considers necessary to administer this section.  The commission shall notify the comptroller in writing immediately if it determines that a well previously certified as producing high-cost gas does not produce high-cost gas or if it takes any action or discovers any information that affects the eligibility of gas for a tax reduction under this section.
(g)  As soon as practicable after March 1 of each year, the comptroller shall determine the median drilling and completion cost for all high-cost wells for which an application for a tax reduction was made during the previous state fiscal year.  In making the determination, the comptroller shall use the drilling and completion cost data required to be reported to the comptroller under Subsection (f).  The median drilling and completion cost shall be used to compute the reduced tax under Subsection (c) and is fixed on the date of the comptroller's determination under this subsection.
(g-1)  The report of drilling and completion costs required under Subsection (f) may not be amended after March 1 of the year following the state fiscal year in which the application was made.
(h)  Information regarding drilling and completion costs included on an application under Subsection (f) is confidential and may not be disclosed, except to the extent aggregated with other similar information to produce industry averages.  Unauthorized disclosure is an offense subject to the same penalty as provided by Section 111.007 for unauthorized disclosure of federal tax return information.
(i)  If, before the commission certifies that a well produces high-cost gas or before the comptroller approves an application for a tax reduction under this section, the tax imposed by this chapter is paid on high-cost gas that otherwise qualifies for the tax reduction provided by this section, the person who remitted the tax is entitled to a refund in an amount equal to the difference between the amount of the tax paid on the gas and the amount of tax that would have been paid on the gas if it had received a tax reduction under this section. The total allowable refund for taxes paid for reporting periods before the date the application is filed may not exceed the total tax paid on the gas that otherwise qualified for the tax reduction and that was produced during the 24 consecutive calendar months immediately preceding the month in which the application for certification under this section that the comptroller approved was filed with the commission.   To receive a refund, the person entitled to the refund must apply to the comptroller for the refund not later than the first anniversary after the date the comptroller approves the application for a tax reduction under this section.
(j)  Repealed by Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.
Added by Acts 1989, 71st Leg., ch. 1197, Sec. 1, eff. Sept. 1, 1989.  Amended by Acts 1993, 73rd Leg., ch. 958, Sec. 1, eff. Sept. 1, 1993;  Acts 1995, 74th Leg., ch. 895, Sec. 1, eff. Sept. 1, 1995;  Acts 1997, 75th Leg., ch. 1040, Sec. 52, 53, eff. Sept. 1, 1997;  Acts 1999, 76th Leg., ch. 365, Sec. 1, eff. Aug. 30, 1999;  Acts 2003, 78th Leg., ch. 209, Sec. 52, eff. Oct. 1, 2003;  Acts 2003, 78th Leg., ch. 1310, Sec. 110, eff. Sept. 1, 2003.
Amended by:
Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 1, eff. September 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 2, eff. September 1, 2017.
Acts 2017, 85th Leg., R.S., Ch. 358 (H.B. 2277), Sec. 3, eff. September 1, 2017.