2023 Texas Statutes › Tax Code › Title 2 - State Taxation › Subtitle I - Severance Taxes › Chapter 202 - Oil Production Tax › Subchapter B. Tax Imposed › Section 202.056. Exemption for Oil and Gas From Wells Previously Inactive

Sec. 202.056.  EXEMPTION FOR OIL AND GAS FROM WELLS PREVIOUSLY INACTIVE.  (a)  In this section:
(1)  "Commission" means the Railroad Commission of Texas.
(2)  "Hydrocarbons" means any oil or gas produced from a well, including hydrocarbon production.
(3)  Repealed by Acts 2019, 86th Leg., R.S., Ch. 17 (S.B. 533), Sec. 3, eff. September 1, 2019.
(4)  "Two-year inactive well" means a well that has not produced oil or gas in more than one month in the two years preceding the date of application for severance tax exemption under this section.  The term does not include a well that is:
(A)  part of an enhanced oil recovery project, as defined by Section 89.002, Natural Resources Code; or
(B)  drilled but not completed and that does not have a record of hydrocarbon production reported to the commission.
(b)  Hydrocarbons produced from a well qualify for a five-year severance tax exemption if the commission designates the well as a two-year inactive well.  The commission may require an applicant to provide the commission with any relevant information required to administer this section.  The commission may require additional well tests to determine well capability as the commission deems necessary.  The commission shall notify the comptroller in writing immediately if the commission determines that the operation of the two-year inactive well has been terminated or if the commission discovers any information that affects the taxation of the production from the designated well.
(c)   If the commission designates a two-year inactive well under this section, the commission shall issue a certificate designating the well as a two-year inactive well.
(d)   An application for two-year inactive well certification must be made to the commission to qualify for the tax exemption under this section.  Hydrocarbons sold after the date of certification are eligible for the tax exemption.
(e)  The commission may revoke a certificate if information indicates that a certified well was not a two-year inactive well or if other lease production is credited to the certified well.  Upon notice to the operator from the commission that the certificate for tax exemption under this section has been revoked, the tax exemption may not be applied to hydrocarbons sold from that well from the date of revocation.
(f)  The commission shall adopt all necessary rules to administer this section.
(g)  To qualify for the tax exemption provided by this section, the person responsible for paying the tax must apply to the comptroller.  The comptroller shall approve the application of a person who demonstrates that the hydrocarbon production is eligible for a tax exemption.  The comptroller may require a person applying for the tax exemption to provide any relevant information necessary to administer this section.  The comptroller shall have the power to establish procedures in order to comply with this section.
(h)  If the tax is paid at the full rate provided by Section 201.052(a) or 202.052(a) before the comptroller approves an application for an exemption provided for in this chapter, the operator is entitled to a credit against taxes imposed by this chapter in an amount equal to the tax paid.  To receive a credit, the operator must apply to the comptroller for the credit before the expiration of the applicable period for filing a tax refund claim under Section 111.104.
(i)  A person who makes or subscribes any application, report, or other document and submits the application, report, or other document to the commission to form the basis for an application for a tax exemption under this section, knowing that the application, report, or other document is false or untrue in a material fact, may be subject to the penalties imposed by Chapters 85 and 91, Natural Resources Code.
(j)  On notice from the commission that the certification for a two-year inactive well has been revoked, the tax exemption shall not apply to oil or gas production sold after the date of notification.  A person who violates this subsection is liable to the state for a civil penalty if the person applies or attempts to apply the tax exemption allowed by this chapter after the certification for a two-year inactive well is revoked.  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.
(k)  The attorney general may recover a penalty under Subsection (j) in a suit brought on behalf of the state.  Venue for the suit is in Travis County.
Added by Acts 1993, 73rd Leg., ch. 1015, Sec. 3, eff. Sept. 1, 1993.  Amended by Acts 1997, 75th Leg., ch. 208, Sec. 1 to 3, eff. Sept. 1, 1997;  Acts 1999, 76th Leg., ch. 365, Sec. 2, eff. Aug. 30, 1999;  Acts 1999, 76th Leg., ch. 893, Sec. 1, eff. June 18, 1999.
Amended by:
Acts 2019, 86th Leg., R.S., Ch. 17 (S.B. 533), Sec. 1, eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 17 (S.B. 533), Sec. 2, eff. September 1, 2019.
Acts 2019, 86th Leg., R.S., Ch. 17 (S.B. 533), Sec. 3, eff. September 1, 2019.