34 Tex. Admin. Code § 3.27 - Exemptions of Governmental Entities and Two-Year Inactive Oil Wells.
(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) Condensate--Liquid hydrocarbon that is or
can be recovered from gas by a separator but does not include liquid
hydrocarbon recovered from gas by refrigeration or absorption and separated by
a fractionating process.
(4)
Hydrocarbons--Any oil or gas produced from a well, including hydrocarbon
production.
(5) 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. 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 gas occupation 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 natural gas tax
shall be borne ratably by all nonexempt interested parties in proportion to
their interests.
(d) Two-year
inactive oil well.
(1) To apply for the
exemption for a two-year inactive oil 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 (form AP-217), or
any successor to that form promulgated by the comptroller.
(2) Casinghead gas produced from a certified
two-year inactive oil well is not subject to the natural gas tax. Since oil
wells do not produce condensate, condensate does not qualify for the exemption
for a two-year inactive oil well.
(3) The exemption extends for five years
beginning with the month following the date certified by the commission.
(4) If the tax is paid at the full
rate provided by Tax Code, §
201.052(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, §
201.052 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
oil well. A two-year inactive oil well that is subsequently recompleted shall
only receive the five-year exemption from the initial certification of the
well. A taxpayer must file another Texas Well Exemption Application (form
AP-217), or any successor to that form promulgated by the comptroller, for the
recompleted oil well identifying the original commission lease number when that
well meets the requirements:
(1) the
commission certifies the recompleted two-year inactive oil well;
(2) the commission assigns a new lease number
for the recompleted oil well; and
(3) the American Petroleum Institute number
for the well does not change.
(f) Oil-Field cleanup regulatory fee. Gas
exempt under subsection (d) of this section is not exempt from the oil-field
cleanup regulatory fee, which is due on casinghead gas sold.
(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.
Notes
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