| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Casinghead gas--Gas or vapor indigenous to an oil
stratum and produced from the stratum with oil.
(2) Commission--The Railroad Commission of Texas.
(3) Hydrocarbons--Any oil or gas produced from a well,
including hydrocarbon production.
(4) Two-year inactive well--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 only includes a well certified by the commission on or after
September 1, 2019, and does not include a well that is:
(A) part of an enhanced oil recovery project, as defined
by Natural Resources Code, §89.002 (Definitions); or
(B) drilled but not completed and that does not have
a record of hydrocarbon production reported to the commission.
(b) Exemption of certain entities. The federal government
and its subdivisions and the State of Texas and its subdivisions are
not subject to the oil production tax.
(1) Subdivisions of the federal government include,
but are not limited to, the following:
(A) the Federal Land Bank;
(B) the Department of the Interior;
(C) the Bureau of Land Management; and
(D) the Army Corps of Engineers.
(2) Subdivisions of the State of Texas include, but
are not limited to, the following:
(A) Texas cities, towns, and villages;
(B) Texas counties;
(C) Texas independent and common school districts;
and
(D) Texas public colleges and universities.
(c) Tax borne ratably. The tax shall be borne ratably
by all nonexempt interested parties in proportion to their interests.
(d) Two-year inactive wells.
(1) To apply for the exemption for a two-year inactive
well, taxpayers must submit to the comptroller a copy of the approved
certification letter provided by the commission and a completed Texas
Well Exemption Application (AP-217), or any successor to that form
promulgated by the comptroller.
(2) The exemption for the two-year inactive well extends
for five years beginning with the month following the date certified
by the commission.
(3) If the tax is paid at the full rate provided by
Tax Code, §202.052(a) (Rate of Tax) before the comptroller approves
an application for an exemption provided for in this subsection (d)
of this section, the operator is entitled to a credit against taxes
imposed by Tax Code, §202.052 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 Tax Code, §111.104 (Refunds).
(e) Recompleted two-year inactive well. A two-year
inactive well that is recompleted shall only receive the five-year
exemption from the initial certification of the well. A taxpayer must
file another Texas Well Exemption Application (AP-217), or any successor
to that form promulgated by the comptroller, for the recompleted well
identifying the original commission lease number when that well meets
the requirements:
(1) the commission certifies the recompleted two-year
inactive well;
(2) the commission assigns a new lease number for the
recompleted well; and
(3) the American Petroleum Institute number for the
well does not change.
(f) Oil-Field cleanup regulatory fee. The exemption
provided by subsection (d) of this section does not extend to the
oil-field cleanup regulatory fee.
(g) Penalty. 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 claims the exemption is liable
to the state for a civil penalty if the person applies or attempts
to apply the tax exemption allowed by subsection (d) of this section
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; or
(2) the difference between the amount of taxes paid
or attempted to be paid and the amount of taxes due.
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