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Notices to Industry, Publications and Statewide Rules

Filing Deadline Extended for Enhanced Oil Recovery Project Reduced Tax Rate Program

 

          Since 1989, operators of enhanced oil recovery

     (EOR) projects have been eligible to apply for a

     reduced state severance tax rate.  This EOR reduced tax

     rate covers all oil production from a new project and

     the incremental production from an expanded project. 

     The EOR rate is 2.3 percent of crude oil value; the

     standard rate is 4.6 percent.  The reduced rate

     continues for up to 10 years.  When this program was

     introduced, the deadline for initial approval

     application filing was January 1, 1994.  Legislation in

     1993 has extended the filing deadline.  To be

     considered for EOR reduced tax rate, an operator may

     now file an application for project and area

     designation approval before January 1, 1998.

     

          Commission procedure remains the same.  Prior to

     active operation of the new or expanded project, the

     operator files a Form H-12, New or Expanded Enhanced

     Oil Recovery Project and Area Designation Approval

     Application.  When project and area designation

     approval is received from the Railroad Commission, the

     operator begins active project operation.  When a

     positive production response is identified, the

     operator files a Form H-13, EOR Positive Production

     Response Certification Application.  A positive

     production response means that the rate of production

     is greater than the rate that would have occurred

     without the project.  To be considered for the enhanced

     oil recovery tax rate, the Form H-13 must be filed

     within 3 years of H-12 approval for secondary projects

     or 5 years for tertiary projects.

     

          Prior to the new legislation, after receiving

     positive production response certification from the

     Commission, the operator could file immediately with

     the Comptroller to pay at the reduced tax rate. If the

     H-12 application for a project was filed prior to

     January 1, 1994, that procedure will continue. 

     However, if an operator files the H-12 application for

     project and area designation approval on or after

     January 1, 1994 and goes on to receive positive

     production response certification from the Commission,

     the full severance tax rate must be paid on all oil

     produced during the period from January 1, 1994 through

     August 31, 1995.  Then, on or after January 1, 1996,

     the payor may apply to the Comptroller for a tax credit

     equal to the difference between the amount paid and the

     amount that would have been due on eligible production

     under the EOR reduced tax rate for that period.  The

     credit may be applied to either oil or gas severance

     taxes regardless of the field from which the production

     originates.  The severance tax on eligible production

     after August 31, 1995 will be paid at the reduced EOR

     rate.

     

          A limited supply of the H-12 and H-13 forms are

     available at the Commission's district offices.  Larger

     quantities may be ordered by calling the Oil and Gas

     Division in Austin at (512) 463-6887.  For further

     information on the reduced EOR severance tax program,

     call the Oil and Gas Division's Technical Hearing

     section at (512) 463-6718.

     

     Austin, Texas  February 1994