2023 Texas Statutes › Tax Code › Title 2 - State Taxation › Subtitle I - Severance Taxes › Chapter 202 - Oil Production Tax › Subchapter B. Tax Imposed › Section 202.0545. Tax Exemption for Enhanced Recovery Projects Using Anthropogenic Carbon Dioxide

Sec. 202.0545.  TAX EXEMPTION FOR ENHANCED RECOVERY PROJECTS USING ANTHROPOGENIC CARBON DIOXIDE.  (a)  Subject to the limitations provided by this section, until the 30th anniversary of the date that the comptroller first approves an application for a tax rate reduction under this section, the producer of oil recovered through an enhanced oil recovery project that qualifies under Section 202.054 for the recovered oil tax rate provided by Section 202.052(b) is entitled to an additional 50 percent reduction in that tax rate if in the recovery of the oil the enhanced oil recovery project uses carbon dioxide that:
(1)  is captured from an anthropogenic source in this state;
(2)  would otherwise be released into the atmosphere as industrial emissions;
(3)  is measurable at the source of capture; and
(4)  is sequestered in one or more geological formations in this state following the enhanced oil recovery process.
(b)  In the event that a portion of the carbon dioxide used in the enhanced oil recovery project is anthropogenic carbon dioxide that satisfies the criteria of Subsection (a) and a portion of the carbon dioxide used in the project fails to satisfy the criteria of Subsection (a) because it is not anthropogenic, the tax reduction provided by Subsection (a) shall be reduced to reflect the proportion of the carbon dioxide used in the project that satisfies the criteria of Subsection (a).
(c)  To qualify for the tax rate reduction under this section, the operator must:
(1)  apply to the comptroller for the reduction and include with the application any information and documentation that the comptroller may require; and
(2)  apply for a certification from  the Railroad Commission of Texas.
(d)  The Railroad Commission of Texas may issue a certification under Subsection (c)(2) only if the commission finds that, based on substantial evidence, there is a reasonable expectation that:
(1)  at least 99 percent of the carbon dioxide sequestered as required by Subsection (a)(4) will remain sequestered for at least 1,000 years; and
(2)  the operator's planned sequestration program will include appropriately designed monitoring and verification measures that will be employed for a period sufficient to demonstrate whether the sequestration program is performing as expected.
(e)  The tax rate reduction does not apply if the operator's sequestration program or the operator's monitoring and verification measures differ substantially from the planned program described by Subsection (d), and the operator shall refund the difference between the amount of the tax paid under this section and the amount that would have been imposed in the absence of this section.
(f)  The comptroller shall approve the application if the operator submits the certification required by Subsection (c)(2) and if the comptroller determines that the oil is otherwise eligible under this section.
(g)  If, before the comptroller approves an application for the tax rate reduction under this section, the tax imposed by this chapter is paid at the rate provided by Section 202.052(a) or (b) on oil that qualifies under this section, the producer or producers of the oil are entitled to a credit against taxes imposed by this chapter in an amount equal to the difference between the tax paid on the oil and the tax due on the oil after the rate reduction under this section is applied.  The credit is allowed to each producer according to the producer's proportionate share in the oil.  To receive a credit, one or more of the producers of the oil must apply to the comptroller for the credit not later than the first anniversary of the date the oil is produced.
(h)  The comptroller and the Railroad Commission of Texas may adopt rules and establish procedures to implement and administer this section.
Added by Acts 2007, 80th Leg., R.S., Ch. 1277 (H.B. 3732), Sec. 9, eff. September 1, 2007.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 1109 (H.B. 469), Sec. 5, eff. September 1, 2009.
Acts 2021, 87th Leg., R.S., Ch. 460 (H.B. 1284), Sec. 6, eff. June 9, 2021.