Bill Text: TX HB3717 | 2019-2020 | 86th Legislature | Introduced

---

Bill Title: Relating to an oil and gas production tax credit for oil and gas producers that provide treated produced water to aquifer storage and recovery project operators.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2019-04-17 - Left pending in committee [HB3717 Detail]

Download: Texas-2019-HB3717-Introduced.html

---

By: Dominguez H.B. No. 3717

A BILL TO BE ENTITLED
AN ACT
relating to an oil and gas production tax credit for oil and gas
producers that provide treated produced water to aquifer storage
and recovery project operators.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle I, Title 2, Tax Code, is amended by
adding Chapter 208 to read as follows:
CHAPTER 208. TAX CREDIT FOR PROVIDING TREATED PRODUCED WATER TO
AQUIFER STORAGE AND RECOVERY PROJECT OPERATOR
Sec. 208.0001. DEFINITIONS. In this chapter:
(1) "Aquifer storage and recovery project" means a
project involving the injection of water into a geologic formation
for the purpose of subsequent recovery and beneficial use.
(2) "Commission" means the Texas Commission on
Environmental Quality.
(3) "Produced water" means water produced in oil or
gas drilling, completion, flowback, or production.
(4) "Producer" has the meaning assigned by Section
201.001 or 202.001, as appropriate.
(5) "Project operator" means a person who undertakes
an aquifer storage and recovery project.
Sec. 208.0002. TAX CREDIT. (a) A producer is entitled to a
credit against the tax imposed under Chapter 202, as applicable, in
the amount and under the conditions and limitations provided by
this chapter if:
(1) the producer provides to a project operator
produced water that has a total dissolved solids concentration of
more than 90,000 milligrams per liter; and
(2) the project operator treats the water for
injection into an aquifer for storage and recovery and shall not
degredate native groundwater, and complies with any federal and
state registration or permit requirements for treating and
injecting the produced water, including any requirements for water
testing and water quality reporting.
(b) Except as provided by Section 208.0003, the total amount
of the credit under this chapter for a reporting period is computed
by:
(1) determining the total number of barrels of
produced water described by Subsection (a) provided to a project
operator during the reporting period that is subsequently treated
during that period;
(2) multiplying the number of barrels determined under
Subdivision (1) by the monthly average closing price of a barrel of
West Texas Intermediate crude oil as recorded on the New York
Mercantile Exchange (NYMEX); and
(3) multiplying the amount determined under
Subdivision (2) by:
2.3 percent requiring the credit to be claimed
under Chapter 202.
(c) Produced water provided to a project operator may be
counted only once in determining the amount of a credit. Only one
producer may claim a credit for the same produced water.
Sec. 208.0003. LIMITATION ON CREDIT AMOUNT. (a) Except as
provided by Subsection (b), the total amount of credits that may be
claimed under this chapter each state fiscal year may not exceed $25
million.
(b) If in the first year of a state fiscal biennium the
amount claimed under this chapter is less than $25 million, the
amount of credits that may be claimed in the second year of the
state fiscal biennium is equal to the sum of:
(1) $25 million; and
(2) the difference between $25 million and the amount
of credits claimed in the first state fiscal year.
(c) Each month, the comptroller shall post on the
comptroller's Internet website the amount of unclaimed credit
remaining for the state fiscal year.
(d) The comptroller by rule shall prescribe procedures by
which the comptroller may allocate credits on a prorated basis if
the limit prescribed by Subsection (a) is reached before the end of
the state fiscal year.
Sec. 208.0004. PROJECT OPERATOR REQUIREMENTS; MONTHLY
REPORT. (a) The commission shall adopt a registration process for
project operators who participate in the program established by
this chapter. Each registered project operator shall submit to the
commission a monthly report that includes, for the preceding month:
(1) the metered volume in barrels of produced water
the project operator received from each producer and treated;
(2) the total dissolved solids concentration of the
produced water received from each producer before treatment; and
(3) the volume of treated water injected into an
aquifer for storage and recovery.
(b) A project operator must hold a permit from the Railroad
Commission of Texas authorizing the project operator to treat fluid
oil and gas waste at a commercial recycling facility.
Sec. 208.0005. CERTIFICATION. (a) To be eligible for the
credit under this chapter, the producer must apply to the
commission for certification that:
(1) the producer has, during the reporting period,
provided to a project operator produced water that has a total
dissolved solids concentration of more than 90,000 milligrams per
liter before injection into an aquifer for storage and recovery;
and
(2) the project operator treated the water during the
reporting period.
(b) The producer shall include with the certificate
application any information the commission determines is necessary
to certify eligibility for the credit and the amount of the credit,
including information sufficient for the commission to identify:
(1) the metered volume in barrels of produced water
provided to a project operator for which the producer intends to
claim a credit; and
(2) the total dissolved solids concentration of that
metered volume of produced water.
(c) The commission shall consider the information provided
by the project operator under Section 208.0004 in determining
whether to certify eligibility for the credit and the amount of the
credit.
(d) If the producer and project operator provide sufficient
information under this section and Section 208.0004, the commission
shall issue a certificate of eligibility to the producer. The
certificate must include:
(1) the information the project operator is required
to provide under Section 208.0004; and
(2) the information the producer is required to
provide under Subsection (b) of this section.
(e) The commission shall immediately notify the comptroller
in writing if the commission:
(1) determines that a producer that previously
received a certificate under this section was not eligible for the
certified credit or is no longer eligible to receive the certified
credit; or
(2) takes any action or discovers any information that
affects the eligibility of the producer for a credit.
Sec. 208.0006. APPLICATION. (a) To claim the credit under
this chapter, the person responsible for paying the tax imposed
under Chapter 201 or 202, as appropriate, must apply to the
comptroller.
(b) The application must include a copy of the certificate
issued by the commission under Section 208.0005 for the reporting
period and any other information required by the comptroller to
sufficiently demonstrate that the producer is eligible for the
credit and the amount of the credit.
(c) In addition to the information required by Subsection
(b), the comptroller may require additional information on a report
required under Subchapter E, Chapter 201, or Subchapter E, Chapter
202.
(d) The comptroller shall approve the application of a
person who demonstrates that the treated water is eligible for the
credit.
Sec. 208.0007. RULES. The comptroller and the commission
shall adopt rules necessary to implement this chapter.
SECTION 2. Chapter 208, Tax Code, as added by this Act,
applies only to produced water provided to a project operator, as
described by Chapter 208, Tax Code, as added by this Act, on or
after the effective date of this Act. Produced water provided
before the effective date of this Act is subject to the law in
effect when the produced water was provided, and that law is
continued in effect for that purpose.
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 September 1, 2019.