SECTION 3.83. Tax Exemption for Two-Year Inactive Wells and Three-Year Inactive Wells

(a) Purpose. The purpose of this section is to provide a procedure by which an operator can obtain commission certification of a wellbore as a two-year inactive well or three-year inactive well in order to qualify for the tax exemptions provided for in the Tax Code, §§201.053, 202.052, and 202.056.

(b) Definitions.

(1) Two-year inactive well--A well that has not produced any hydrocarbons in more than one calendar month in the two years prior to the date of certification by the Commission under this section.

(2) Three-year inactive well--A well that has not produced any hydrocarbons in more than one calendar month in the three years prior to the date of certification by the commission under this section.

(3) Eligible well--Wells eligible under this section include those that:

(A) were previous producing or injection wells that have not been plugged or abandoned; or

(B) have been plugged and abandoned; or

(C) are active injection wells.

(4) Well--A wellbore with single or multiple completions.

(c) Certification. The commission or its delegate may certify a well as a two-year inactive well or a three-year inactive well. If the commission or its delegate declines to certify a well administratively, the operator affected by this action may request a hearing.

(d) Revocation of Certification. Certification of a two-year inactive well or a three-year inactive well may be revoked by the commission for cause which includes, but is not limited to, receipt of information by the commission that a certified well produced hydrocarbons in more than one calendar month in the applicable two or three years prior to certification, or if production from other wells is credited to the two-year inactive well or the three-year inactive well, or if a certified well is reported to the commission to be capable of production but is not capable of production. The Comptroller of Public Accounts will be notified of any revocation.

(e) Certified Wells.

(1) Three-year inactive wells. The commission may not certify a three-year inactive well under this section after February 29, 1996. Prior to applying to the Comptroller of Public Accounts for the tax incentives listed in subsection (a) of this section, the operator of a three-year inactive certified well shall file with the commission a test report showing productive capability for the well. Production is presumed to begin on this well test date. The certification remains with the well in the event of a change of operator or ownership.

(2) Two-year inactive wells. The commission may not designate a two-year inactive well under this section after February 28, 2010. An application for two-year inactive well certification shall be made during the period of September 1, 1997, through August 31, 2009, to qualify for the tax exemption. Certification will be issued upon the filing of a test report showing the well's capability and an approval of application for certification. Production is presumed to begin on the well test date as reported on the appropriate report. The certification shall remain with the well in the event of a change of operator or ownership.

Source Note: The provisions of this §3.83 adopted to be effective November 23, 1993, 18 TexReg 8195; amended to be effective January 10, 1996, 20 TexReg 11119; amended to be effective July 21, 1998, 23 TexReg 7363; amended to be effective September 10, 2001, 26 TexReg 6869