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RULE §3.101Certification for Severance Tax Exemption or Reduction for Gas Produced From High-Cost Gas Wells

the application may be approved, the applicant shall submit a letter certifying that all affected persons were sent a copy of the notice of application, and the date on which the notice of application was sent.

  (3) In addition to the written request and list of affected persons, the applicant shall submit the following information in duplicate:

    (A) a geographical and geological description of the formation, including:

      (i) a map with an outline of the geographical limits of the formation in and around the requested area, with the proposed designated areal boundaries shown, with counties, surveys and abstracts identified and with the locations clearly identified for all wells inside the requested area that have penetrated the proposed formation; all wells (i.e., those that penetrated the proposed formation) shown on the map inside the requested area shall include either the commission's gas well identification number or the API number (if available);

      (ii) a list of the counties involved, abstract numbers, survey names, geologic formation markers, and any other descriptive information that will aid in identifying the subject formation including an estimate of the number of acres within the requested area; and

      (iii) a structure map contoured on the top of the formation and a cross-section to depict upper and lower limits of the proposed formation, or specific portion thereof.

    (B) engineering and geological exhibits, including a written explanation of each, to establish the following:

      (i) that the in situ permeability throughout the proposed formation or specific portion thereof is 0.1 millidarcies or less, as determined by geometric mean or median analysis of available data from all wells that either have been tested or are completed in the proposed formation within the requested area. If no in situ permeability estimates are provided for wells that are in the requested area and have been tested and/or are completed in the proposed formation, an explanation shall be provided;

      (ii) that the pre-stimulation stabilized production rate against atmospheric pressure at the wellhead, as determined by a geometric mean or median analysis of available data from all wells within the requested area that either have been tested and/or are completed in the proposed formation or specific portion thereof, does not exceed the production rate listed in the following table:

Attached Graphic

      (iii) that no well drilled into the formation is expected to produce, without stimulation, more than five barrels of crude oil per day; and

      (iv) that the requested designated area does not extend beyond a two and one-half mile radius drawn from any data point well.

(g) Commission action on applications for individual well certifications and for tight formation area designations.

  (1) Each application, for an individual well certification, shall be assigned a docket number identifying it as a severance tax application. A notice of receipt shall be sent to the applicant, indicating the assigned docket number and receipt date. All further correspondence shall include this docket number.

  (2) The director may administratively approve the individual well certification applications if the forms and information submitted by the operator establish that the gas qualifies as high-cost gas eligible for the severance tax exemption or tax reduction. If the director denies administrative approval, the applicant shall have the right to a hearing.

  (3) If Commission staff finds that the data submitted with the tight formation area designation applications are complete and comply with the requirements set out in subsection (f)(3) of this section and if no protest to the application is filed within 21 days of the notice, the application shall be presented to the Commission for approval. If Commission staff finds the data submitted are incomplete, or indicate the area does not qualify, or if a protest is filed within the 21-day notice period, the applicant shall request a hearing to have the application considered. If the applicant does not request such a hearing or if the applicant fails to appear at a requested hearing, the application shall be dismissed. Any such hearing shall be held only after at least 10 days' notice by the Commission to all affected persons as defined in subsection (f)(2) of this section. If no protestant appears at the hearing, and/or if the application and any evidence presented at the hearing establishes that the subject formation meets the requirements for a tight formation certification, the application shall be presented to the Commission for approval.

(h) Reporting. To qualify for the exemption or tax reduction provided by Texas Tax Code, §201.057(a)(2)(A), all persons responsible for paying the tax shall apply with the comptroller after receiving a copy of the Commission's certification letter. The application shall contain the Commission's letter certifying that the well produces or will produce high-cost gas, a completed copy of the Commission's application for certification form and a completed copy of the applicable Comptroller of Public Accounts' form. To obtain the maximum tax exemption or tax reduction, the application shall be filed with the comptroller at the later of the 180th day after the first day of production or the 45th day after the certification by the Commission. If the application is not filed by the applicable deadline, the tax exemption or reduction will be reduced by 10% 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.

Source Note: The provisions of this §3.101 adopted to be effective January 11, 1995, 19 TexReg 10351; amended to be effective September 15, 1997, 22 TexReg 8974; amended to be effective August 13, 2001, 26 TexReg 6009; amended to be effective October 12, 2003, 28 TexReg 8585

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