| (2) an application for approval of a unitization agreement for purposes of carrying out the enhanced oil recovery project under the Natural Resources Code, §§101.001 et seq.; or (3) an application for approval for certification of the project as a tertiary recovery project. (f) Opportunity for hearing. A commission representative may administratively approve the application. If the commission representative denies administrative approval, the applicant shall have the right to a hearing upon request. After hearing, the examiner shall recommend final action by the commission. (g) Approval and certification. (1) Project approval. In order to be eligible for the recovered oil tax rate as provided in the Tax Code, §202.052(b), the operator shall apply for and be granted Commission approval of a new EOR project or an expansion of an existing EOR project, prior to commencing active operation of the new project or expanded project. For a project to be approved the operator shall: (A) prove that it qualifies as an EOR project; (B) designate the area to be affected by the project and obtain Commission approval of the designation; and (C) if production from the wells within the project area is reported with production from wells not in the project area, designate the method to account for and report production from the project area. (2) Positive production response certificate. (A) The operator of an EOR project that meets the requirements of this section shall demonstrate to the Commission a positive oil production response before the operator can receive Commission certification of such a positive production response. The certification date may be any date desired by the operator, subject to Commission approval, following the date on which a positive oil production response first occurred. The operator shall apply for a positive production response certificate within three years of project approval for secondary projects, and within five years of project approval for tertiary projects, to qualify for the recovered oil tax rate. The oil produced from the designated area of a new EOR project or incremental oil produced from the designated area of an expanded EOR project after the date of certification of a positive production response is eligible for the recovered oil tax rate. The operator shall apply to the comptroller pursuant to the Tax Code, §202.052 and §202.054, to qualify for the recovered oil tax rate. (B) The application for positive response certification shall include: (i) production and injection graphs with supporting tabular data illustrating a positive production response and volumes of water or other substances that have been injected on the designated area since the initiation of the new or the expanded EOR project; (ii) a plat of the affected area showing all injection and producing wells, with completion dates; and (iii) any other data requested by the Oil and Gas Division. (C) The application for the positive production response certificate shall be processed administratively. If the Commission representative denies administrative approval, the applicant shall have the right to a hearing upon request. After hearing, the examiner shall recommend final action by the Commission. (h) Annual reporting. (1) The operator shall file an annual report on the appropriate form with the Oil and Gas Division each year the project remains eligible for the reduced severance tax rate. This form shall be filed within 30 days of the first anniversary of the date that the Commission acted on the EOR positive production response certification application and annually thereafter. (2) The report shall contain the following: (A) Commission certification date of positive production response; (B) monthly volume of injected fluid(s) and anthropogenic carbon dioxide; (C) number of well(s) used for injection; (D) monthly production of oil, gas, and water; (E) number of active producing wells; and (F) any other relevant information requested by the Oil and Gas Division. (i) Reduced or enlarged areas. The operator may apply for reduced or enlarged project area certification if the application for reduction or enlargement is received prior to the filing of an application for positive production response certification of the original enhanced oil recovery project. (j) Termination and penalty. Upon approval by the Commission and the comptroller, the recovered oil tax rate shall continue for a maximum of 10 years, unless the project is sooner terminated. If the project is terminated prior to the 10-year period, the operator shall notify the Commission and the comptroller in writing within 30 days after the last day of active operations. Failure to so notify may result in civil penalties, interest, and the tax due. If the Commission determines a project has been terminated or there is action that affects the tax rate, it shall notify the comptroller immediately in writing. (k) Additional tax rate reduction for enhanced recovery projects using anthropogenic carbon dioxide. (1) Subject to the limitations provided by Texas Tax Code, §202.0545, until the later of the seventh anniversary of the date that the Comptroller of Public Accounts first approves an application for a tax rate reduction under this subsection or the effective date of a final rule adopted by the United States Environmental Protection Agency regulating carbon dioxide as a pollutant, the producer of oil recovered through an EOR project that qualifies under Texas Tax Code, §202.054, for the recovered oil tax rate provided by Texas Tax Code, §202.052(b), is entitled to an additional 50 percent reduction in that tax rate if in the recovery of the oil the EOR project uses carbon dioxide that: (A) is captured from an anthropogenic source in this state; (B) would otherwise be released into the atmosphere as industrial emissions; (C) is measurable at the source of capture; and (D) is sequestered in one or more geological formations in this state following the EOR process. (2) In the event that a portion of the carbon dioxide used in the EOR project is anthropogenic carbon dioxide that satisfies the criteria of paragraph (1) of this subsection and a portion of the carbon dioxide used in the project fails to satisfy the criteria of paragraph (1) of this subsection because it is not anthropogenic, the tax reduction provided by paragraph (1) of this subsection shall be reduced to reflect the proportion of the carbon dioxide used in the project that satisfies the criteria of paragraph (1) of this subsection. (3) To qualify for the tax rate reduction under this subsection, the operator shall: (A) apply for a certification from the Commission if carbon dioxide used in the project is to be sequestered in an oil or natural gas reservoir; and (B) apply to the Comptroller of Public Accounts for the reduction and include with the application any information and documentation that the comptroller may require. (4) To qualify for the additional reduced recovered oil tax rate under this subsection the operator shall: (A) submit an application for certification to the Commission's Austin Office for approval on the appropriate form that is executed and certified as provided for on the form; and (B) provide the Commission with: (i) plats showing the proposed project area and all wells within the area; (ii) production and injection history; (iii) planned enhanced oil recovery procedures; (iv) information to demonstrate that the carbon dioxide to be injected is anthropogenic and a description of the method(s) of capturing and measuring the captured carbon dioxide at the source; (v) a description of the planned sequestration program reasonably expected to ensure that at least 99% of the sequestered carbon dioxide will remain sequestered for at least 1,000 years; (vi) planned monitoring and verification measures, including the planned duration of such measures, that will be employed to demonstrate that the sequestration program is performing as expected; and (vii) any other pertinent information requested by the Commission. (5) The Commission may issue the certification for the reduced tax rate under this subsection only if the Commission finds that, based on substantial evidence, there is a reasonable expectation that: (A) the operator's planned sequestration program will ensure that at least 99 percent of the anthropogenic carbon dioxide sequestered will remain sequestered for at least 1,000 years; and Cont'd... |
