85R20506 CJC-F     By: Darby H.B. No. 3201     Substitute the following for H.B. No. 3201:     By:  Bohac C.S.H.B. No. 3201       A BILL TO BE ENTITLED   AN ACT   relating to the severance tax exemption for oil and gas produced   from certain inactive wells.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 202.056(a)(4), Tax Code, is amended to   read as follows:                (4)  "Two-year inactive well" means 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 does not include a well that is:                      (A)  part of an enhanced oil recovery project, as   defined by Section 89.002, Natural Resources Code; or                      (B)  drilled but not completed and that does not   have a record of hydrocarbon production reported to the commission.          SECTION 2.  Section 202.056, Tax Code, is amended by   amending Subsections (b), (c), (d), (e), (h), and (i) and adding   Subsections (j) and (k) to read as follows:          (b)  Hydrocarbons produced from a well qualify for a   five-year [10-year] severance tax exemption if the commission   designates the well as a [three-year inactive well or a] two-year   inactive well. The commission may require an applicant to provide   the commission with any relevant information required to administer   this section. The commission may require additional well tests to   determine well capability as the commission [it] deems necessary.   The commission shall notify the comptroller in writing immediately   if the commission [it] determines that the operation of the   [three-year inactive well or] two-year inactive well has been   terminated or if the commission [it] discovers any information that   affects the taxation of the production from the designated well.          (c)  [If the commission designates a three-year inactive   well under this section, it shall issue a certificate designating   the well as a three-year inactive well as defined by Subsection   (a)(3) of this section. The commission may not designate a   three-year inactive well under this section after February 29,   1996.] If the commission designates a two-year inactive well under   this section, the commission [it] shall issue a certificate   designating the well as a two-year inactive well [as defined by   Subsection (a)(4) of this section. The commission may not   designate a two-year inactive well under this section after   February 28, 2010].          (d)  [An application for three-year inactive well   certification shall be made during the period of September 1, 1993,   through August 31, 1995, to qualify for the tax exemption under this   section.] An application for two-year inactive well certification   must be made to the commission [shall be made during the period   September 1, 1997, through August 31, 2009,] to qualify for the tax   exemption under this section. Hydrocarbons sold after the date of   certification are eligible for the tax exemption.          (e)  The commission may revoke a certificate if information   indicates that a certified well was not a [three-year inactive well   or a] two-year inactive well[, as appropriate,] or if other lease   production is credited to the certified well. Upon notice to the   operator from the commission that the certificate for tax exemption   under this section has been revoked, the tax exemption may not be   applied to hydrocarbons sold from that well from the date of   revocation.          (h)  If the tax is paid at the full rate provided by Section   201.052(a) or [, 201.052(b),] 202.052(a)[, or 202.052(b)] before   the comptroller approves an application for an exemption provided   for in this chapter, the operator is entitled to a credit against   taxes imposed by this chapter 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 Section 111.104.          (i)  A [Penalties                [(1)  Any] person who makes or subscribes any   application, report, or other document and submits the application,   report, or other document [it] to the commission to form the basis   for an application for a tax exemption under this section, knowing   that the application, report, or other document is false or untrue   in a material fact, may be subject to the penalties imposed by   Chapters 85 and 91, Natural Resources Code.          (j)  On [(2)  Upon] notice from the commission that the   certification for a [three-year inactive well or 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 [Any]   person who violates this subsection is liable to the state for a   civil penalty if the person applies or attempts to apply the tax   exemption allowed by this chapter after the certification for a   [three-year inactive well or a] two-year inactive well is revoked.   The amount of the penalty may not exceed the sum of:                (1) [(A)]  $10,000; and                (2) [(B)]  the difference between the amount of taxes   paid or attempted to be paid and the amount of taxes due.          (k) [(3)]  The attorney general may recover a penalty under   Subsection (j) [Subdivision (2) of this subsection] in a suit   brought on behalf of the state. Venue for the suit is in Travis   County.          SECTION 3.  Section 202.056(a)(3), Tax Code, is repealed.          SECTION 4.  The changes in law made by this Act apply only to   an oil or gas well designated by the Railroad Commission of Texas as   a two-year inactive well on or after the effective date of this Act.   An oil or gas well designated by the Railroad Commission of Texas as   a two-year inactive well, or as a three-year inactive well, before   the effective date of this Act is governed by the law in effect   immediately before that date, and the former law is continued in   effect for that purpose.          SECTION 5.  This Act takes effect September 1, 2017.