(a) Purpose. This section specifies the procedure by which an operator can obtain a Railroad Commission of Texas certification that natural gas from a particular gas well qualifies as high-cost natural gas under the Texas Tax Code, Chapter 201, Subchapter B, §201.057(a)(2)(A) and that such gas is exempt from or eligible for a reduction of the severance tax imposed by the Texas Tax Code, Chapter 201.
(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Commission--The Railroad Commission of Texas.
(2) Completion--The act of making a well capable of producing gas from a particular commission designated or new field.
(3) Completion date--The date on which a well is first made capable of producing oil or gas from a particular commission-designated or new field, as shown on the completion report filed by the operator with the commission.
(4) Comptroller--The Comptroller of Public Accounts of the State of Texas.
(5) Data-point well--A well that has been tested and/or produced in the proposed tight gas formation; and, from the test results or other data, applicant provides a measured or calculated in situ permeability and/or a measured or calculated pre-stimulation stabilized flow rate against atmospheric pressure.
(6) Director--The director of the Oil and Gas Division or the director's delegate. Any authority given to the director in this section is also retained by the commission. Any action taken by the director pursuant to this section is subject to review by the commission.
(7) High-cost gas--Natural gas which the commission finds to be:
(8) Operator--The person responsible for the actual physical operation of a gas well.
(9) Spud date--The date of commencement of drilling operations, as shown on commission records.
(c) Applicability.
(1) A severance tax exemption is available for high-cost gas produced from a well that is spudded or completed between May 24, 1989, and September 1, 1996. Eligible high-cost gas shall be exempt from the tax imposed by the Texas Tax Code, Chapter 201, during the period from September 1, 1991, through August 31, 2001.
(2) A severance tax reduction is available for high-cost gas produced from a well that is spudded or completed after August 31, 1996. Eligible high-cost gas shall be entitled to a reduction of the tax imposed by the Texas Tax Code, Chapter 201, for the first 120 consecutive calendar months beginning on the first day of production or until the cumulative value of the tax reduction equals 50% of the drilling and completion costs incurred for the well, whichever occurs first. The amount of tax reduction is determined pursuant to the Texas Tax Code, §201.057(c). If the application for certification is submitted to the Commission after January 1, 2004, the total allowable credit for taxes paid for reporting periods before the date the application is filed may not exceed the total tax paid on the gas that otherwise qualified for the exemption or tax reduction and that was produced during the 24 consecutive calendar months immediately preceding the month in which the application for certification under this section was filed with the Commission.
(3) The plug back or deepening of an existing wellbore qualifies as a completion under this section. When the plug back or deepening is completed prior to September 1, 1996, the gas produced may qualify for a tax exemption. When the plug back or deepening is completed after August 31, 1996, the gas produced may qualify for a tax reduction. The plug back or deepening qualifies as a completion if:
(4) If the operator determines that a gas well previously certified as producing high-cost gas no longer produces high-cost gas or if the operator takes any action or discovers any information that affects the eligibility of gas for an exemption or tax reduction under Texas Tax Code, §201.057, the operator shall notify the Commission in writing within 30 days after such an event occurs.
(5) If the Commission determines that a gas well previously certified as producing high-cost gas no longer produces high-cost gas or if the commission takes any action or discovers any information that affects the eligibility of gas for an exemption or tax reduction under Texas Tax Code, §201.057, the Commission shall notify within 48 hours, in writing, the comptroller and the operator.
(d) Application procedure.
(1) An application for a state severance tax exemption or tax reduction for a gas well may be made only by the operator of that well. The operator shall file one copy of the required application form, one copy of the required attachments specified in subsection (e)(1)-(6) of this section and any additional information deemed necessary by the Commission to clarify, explain and support the required attachments. Submission of legible copies of required attachments shall comply if the application includes a statement, signed by the operator, that the attachments are true and correct copies of the documents originally filed with the Commission. However, the Commission may require an operator to file certified copies of required attachments or other documents from Commission files if necessary for a certification.
(2) Filings and correspondence on high-cost gas state severance tax applications shall be addressed to the Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967, Attention: High-Cost Gas Severance Tax Section. No filings may be made at the district offices.
(e) Application requirements for individual well certifications. To qualify for the severance tax exemption or tax reduction, the operator shall prove that the gas produced is high-cost gas by providing the following information:
(1) Applications for wells producing deep high-cost gas shall include:
(2) Applications for wells producing geopressured brine shall include:
(3) Applications for wells producing coal seam gas shall include:
(4) Applications for wells producing Devonian shale gas shall include:
(5) Applications for wells producing designated tight formation gas shall include:
(6) Applications for wells producing production enhancement gas shall include:
(f) Application requirements for tight formation area certifications.
(1) If justification for an individual well application is based on a tight formation certification and the well is not located within a geographical area that has been previously certified as a designated tight formation area or the well is not completed in a formation interval that has been previously certified as a designated tight formation by the Federal Energy Regulatory Commission under the Natural Gas Policy Act or by the Railroad Commission of Texas, the operator shall first apply for a tight formation area designation.
(2) An applicant requesting a tight formation area designation shall submit a written request to the High-Cost Gas Severance Tax Section, at the address given in subsection (d)(2) of this section, for a certification that a named formation or a specific portion thereof is a tight formation. The applicant shall supply a list of the names and addresses of all affected persons. For purposes of this subsection, "affected persons" means all operators of all wells listed on the current proration schedule for the applicable field or fields located within the proposed designated area. The applicant shall mail or deliver a copy of the prescribed, completed notice of application form to all affected persons, and if required, shall publish the notice of application in accordance with §1.46 of this title (relating to Notice by Publication in Oil and Gas and Surface Mining and Reclamation Nonrulemaking Proceedings), as found in the Commission's General Rules of Practice and Procedure (16 Texas Administrative Code Chapter 1). Notice of application forms may be obtained by contacting the Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967, Attention: High-Cost Severance Tax Section. Before Cont'd...