| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Average taxable price of oil--The price of oil,
certified by the comptroller, determined by adding the closing price
of each market day adjusted to 2005 dollars during the previous three
months and dividing the sum by the total market days in the three-month
period.
(2) Commission--The Railroad Commission of Texas.
(3) Operator--The person responsible under law or commission
rules for the physical operation of a lease.
(4) Qualifying low-producing lease--An oil lease that
produces less than 15 barrels of oil per day of production per well
or produces less than 5.0% recoverable oil per barrel of produced
water during the three-month period prior to the beginning date of
the credit. For purposes of qualifying the lease, the production per
day is determined by computing the average daily per well production
from the lease using the greater of the monthly production from the
lease as reported in the monthly lease production reports made to
the commission and the monthly production from the lease as reported
in the producer's reports made to the comptroller under Tax Code, §202.201
(Producer's Report), including any amendments to those reports, and
dividing the sum of the production reported on the lease by the sum
of the number of well days. The calculation will use the three-month
period prior to the beginning date of the credit.
(5) Well day--One well producing for one day.
(b) To qualify a lease, the operator of the lease shall
provide the following:
(1) a copy of the monthly production report made to
the commission for the lease for the three-month period prior to the
beginning date of the credit;
(2) a list of the producing wells on the lease and
supporting documentation to show the number of days each well was
producing during the three-month period;
(3) a completed comptroller Texas Crude Oil Lease Tax
Exemption Application (form AP-216) for the lease;
(4) the starting date that the lease met the three-month
production limitations qualifying the well as a low-producing well;
(5) a statement as to whether tax has been paid on
the crude oil for periods after the effective date of the credit and
the name of the party paying the tax; and
(6) when production during a three-month period is
less than 5.0% recoverable oil per barrel of produced water, the operator
may submit documentation that the well meets this requirement. An
example of acceptable documentation is a production record showing
the amount of water produced and the amount of oil produced for the
three-month period. A taxpayer requesting approval under this paragraph
shall also send the $100 filing fee with the application.
(c) The monthly average taxable price of oil will be
published in the Texas Register the
month following the actual production month. This publication will
notify the taxpayer of the availability of the credit prior to the
due date of the report. Credits are as follows:
(1) if the monthly average taxable price of oil is
more than $30 per barrel, there will be no credit for that reporting
month;
(2) if the monthly average taxable price of oil is
more than $25 per barrel, but not more than $30 per barrel, there
will be a 25% credit for oil sold from a qualified lease for that
reporting month;
(3) if the monthly average taxable price of oil is
more than $22 per barrel, but not more than $25 per barrel, there
will be a 50% credit for oil sold from a qualified lease for that
reporting month;
(4) if the monthly average taxable price of oil is
$22 per barrel or less, there will be a 100% credit for oil sold from
a qualified lease for that reporting month; and
(5) when available, tax credits provided for qualifying
leases under this subsection may be combined with Tax Code, §202.054
(Qualification of Oil From New or Expanded Enhanced Recovery Project
for Special Tax Rate) or §202.0545 (Tax Exemption for Enhanced
Recovery Projects Using Anthropogenic Carbon Dioxide).
(d) If the tax is paid at the full rate provided by
Tax Code, Chapter 202 (Oil Production Tax), on oil produced on or
after the effective date of the tax credit but before the date the
comptroller approves an application for the tax credit, the operator
is entitled to a credit on taxes due under Tax Code, Chapters 202
or 201, in an amount equal to the credit approved for that period.
To receive a credit, the operator or the party remitting the tax must
apply to the comptroller by filing amended reports. If a party other
than the operator has remitted the tax, the operator must provide
the party remitting the tax a copy of the approved comptroller application
form that provides that the lease qualifies for the tax credit.
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