Relating to a severance tax exemption for oil and gas produced from certain previously inactive restimulation wells; providing a civil penalty.

89(R) HB 3159 - Enrolled version - Bill Text

H.B. No. 3159

AN ACT

relating to a severance tax exemption for oil and gas produced from

certain previously inactive restimulation wells; providing a civil

penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter B, Chapter 202, Tax Code, is amended

by adding Section 202.062 to read as follows:

Sec.

202.062.

TAX EXEMPTION FOR OIL AND GAS PRODUCED FROM

CERTAIN RESTIMULATION WELLS. (a) In this section:

(1)

"Commission" means the Railroad Commission of

Texas.

(2)

"Consecutive months" means months in consecutive

order, regardless of whether an oil or gas well produces

hydrocarbons during any or all of those months.

(3)

"Hydrocarbons" means the oil, gas, condensate, and

other hydrocarbons produced from an oil or gas well.

(4)

"Operator" means the person responsible for the

actual physical operation of an oil or gas well.

(5)

"Qualifying well" means a restimulation well that

has been certified by the commission under this section as a

qualifying well.

(6)

"Restimulation costs" means expenses that are

directly attributable to payment for the restimulation treatment

performed on a restimulation well.

(7)

"Restimulation treatment" means the treatment of

an oil or gas well with an application of fluid under pressure for

the purpose of initiating or propagating fractures in a target

geologic formation to enhance the production of hydrocarbons from

the well.

(8)

"Restimulation well" means a previously completed

oil or gas well that, following production of hydrocarbons, became

an inactive well and subsequently received a restimulation

treatment.

(b) This section does not apply to an oil or gas well that:

(1)

has less than 60 months of production reported to

the commission before the date a restimulation treatment is

performed;

(2)

is part of an enhanced oil recovery project, as

defined by Section 89.002, Natural Resources Code;

(3)

is drilled but not completed and that does not have

a record of hydrocarbon production reported to the commission; or

(4)

is not an inactive well, as defined by Section

89.002, Natural Resources Code, immediately before the

restimulation treatment is performed.

(c)

Hydrocarbons produced from a qualifying well are exempt

from the taxes imposed by Chapter 201 and this chapter until the

earlier of:

(1)

the last day of the 36th consecutive month

following the month in which the well first produces hydrocarbons

after a restimulation treatment is completed; or

(2)

the date on which the cumulative amount of taxes

exempted under Chapter 201 and this chapter and any credit under

Subsection (l) equals the lesser of:

(A)

the restimulation costs described by

Subsection (j); or

(B) $750,000.

(d)

Notwithstanding Section 201.057, gas produced from a

qualifying well that was previously certified by the commission as

a well that produces or will produce high-cost gas is not eligible

for the tax reduction provided by that section during the period the

gas is exempt from tax under Subsection (c) of this section.

(e)

The operator of a restimulation well may apply to the

commission for certification that the well is a qualifying well.

The application may be made at any time after the first day the well

produces hydrocarbons following the date a restimulation treatment

is completed. The commission may require an applicant to provide

any relevant information required to administer this section.

(f)

If the commission approves an application submitted

under Subsection (e), the commission shall issue a certificate

designating the well as a qualifying well.

(g)

The commission may revoke a certificate issued under

Subsection (f) if the commission determines that:

(1)

a well that was certified as a qualifying well is

not a restimulation well; or

(2)

the operator is claiming or has claimed an

exemption under this section for hydrocarbons produced from a well

that is not a qualifying well.

(h)

The commission shall notify an operator that a

certificate issued under Subsection (f) has been revoked. An

exemption provided by this section is automatically revoked on the

date the commission revokes a certificate unless the commission

issues a new certificate for the well.

Hydrocarbons produced from

the well after the date a certificate is revoked are not eligible

for the exemption provided by this section.

(i)

To qualify for the exemption provided by this section,

the person responsible for paying the tax must apply to the

comptroller.

The comptroller shall determine the form and content

of the application, which must include:

(1)

the certificate issued by the commission under

Subsection (f); and

(2)

a report of the restimulation costs incurred to

perform the restimulation treatment on the qualifying well from

which the hydrocarbons that are the subject of the application are

produced.

(j)

For the purposes of Subsection (i)(2), restimulation

costs include only the current and contemporaneous restimulation

costs associated with performing the restimulation treatment.

(k)

The comptroller shall approve an application for an

exemption provided by this section if the application meets the

requirements of this section.

The comptroller may require the

person applying for the exemption to provide any relevant

information necessary to administer this section. The comptroller

by rule may establish procedures to comply with this section.

(l)

If the tax imposed under Chapter 201 or this chapter, as

applicable, is paid at the applicable rate on hydrocarbons produced

from a qualifying well on or after the date the commission issues a

certificate for the well under Subsection (f) but before the date

the comptroller approves an application for an exemption for

hydrocarbons produced from the well under Subsection (k), the

person responsible for paying the tax is entitled to a credit

against the taxes due under Chapter 201 or this chapter in an amount

equal to the amount of tax paid during that period on hydrocarbons

produced from the qualifying well. To receive the credit, the

person responsible for paying the tax must apply to the comptroller

before the expiration of the applicable period for filing a tax

refund claim under Section 111.104.

(m)

A person who makes or submits an application, report, or

other document or item of information to the commission or the

comptroller under this section that the person knows is false or

untrue in a material fact is subject to the penalties imposed by

Chapters 85 and 91, Natural Resources Code.

(n)

A person who applies or attempts to apply for an

exemption under this section for hydrocarbons produced from a well

the person knows is not a qualifying well is liable to the state for

a civil penalty. The amount of the penalty may not exceed the sum

of:

(1) $10,000; and

(2)

the difference between the amount of taxes paid or

attempted to be paid and the amount of taxes due.

(o)

The attorney general may recover a penalty under

Subsection (n) in a suit brought on behalf of the state. Venue for

the suit is in Travis County.

(p)

The commission may adopt rules necessary to administer

this section.

SECTION 2. Section 202.062, Tax Code, as added by this Act,

applies only to hydrocarbons produced on or after January 1, 2026.

SECTION 3. The change in law made by this Act does not

affect tax liability accruing before the effective date of this

Act. That liability continues in effect as if this Act had not been

enacted, and the former law is continued in effect for the

collection of taxes due and for civil and criminal enforcement of

the liability for those taxes.

SECTION 4. This Act takes effect January 1, 2026.

______________________________

______________________________

President of the Senate

Speaker of the House

I certify that H.B. No. 3159 was passed by the House on May

15, 2025, by the following vote: Yeas 115, Nays 23, 3 present, not

voting.

______________________________

Chief Clerk of the House

I certify that H.B. No. 3159 was passed by the Senate on May

26, 2025, by the following vote: Yeas 29, Nays 2.

______________________________

Secretary of the Senate

APPROVED: _____________________

Date

_____________________

Governor