1. (a) Producers producing crude oil from an enhanced oil recovery project approved and certified by the Texas Railroad Commission may file with the comptroller an application for a reduced tax rate.

2. (b) An application for taxation at the reduced tax rate must be filed.

   1. (1) The operator shall make application on forms prescribed by the comptroller for the reduced tax rate on qualified oil produced and sold by the operator. The operator shall be responsible for advising the comptroller whenever the status of the enhanced oil recovery project changes in a manner that would affect the imposition of the tax due on the oil produced from the project area.
   2. (2) A nonoperator taking production in-kind from a project area for which the operator has filed an application for tax relief shall also file an application for tax relief on forms prescribed by the comptroller for the qualified oil produced and sold by the nonoperator.
3. (c) The application for tax relief filed by the operator shall include an approved copy of Texas Railroad Commission Form H-12, Enhanced Oil Recovery Project and Area Designation Approval Application, and a copy of the Certificate of Positive Production Response issued by the Texas Railroad Commission.
4. (d) The application for tax relief filed by a nonoperator must contain the project name as designated by the operator, and the project number as designated by the Texas Railroad Commission. The application for tax relief filed by a nonoperator will not be granted until the operator has complied with subsection (c) of this section.
5. (e) When an application for tax relief has been approved by the comptroller, a producer may file amended reports to recover the additional tax paid by the producer on qualified oil for periods after the effective date of the reduced tax rate and prior to the actual date of approval. In order to obtain a refund, the amended reports must be filed within one year after the date the Texas Railroad Commission certifies that a positive production response has occurred.
6. (f) Producers obtaining an approval for relief from the comptroller shall furnish to any first purchaser required to report a purchase of the enhanced recovery oil a copy of the comptroller's approval. Any first purchaser paying tax on qualified oil for periods after the effective date of the reduced rate and prior to the actual date of approval shall file amended reports to recover the additional tax paid. In order to obtain a refund, the amended reports must be filed within one year after the date the Texas Railroad Commission certifies that a positive production response has occurred.
7. (g) Producers and purchasers reporting enhanced recovery oil shall designate the oil as being qualified secondary recovery oil, or oil recovered by any other approved enhanced recovery method, according to instructions contained on the crude oil tax reports.
8. (h) The reduced tax rate does not apply until an amount of oil equal to the oil produced and stored on the lease prior to the effective date of the tax relief is removed from the lease.
9. (i) Any crude oil produced and stored on the lease during a period in which the reduced tax rate applies, but removed from the lease after the reduced tax rate period has expired, qualifies for the reduced tax rate. The reduced tax rate will apply until the volume of oil removed equals the volume of qualified oil stored.
10. (j) Producers delivering to a first purchaser oil which contains a volume of qualified secondary recovery oil, and/or a volume of qualified oil produced by any other approved recovery method, and a volume of oil not eligible for the reduced tax, or any combination of these, shall furnish to the first purchaser the volume information necessary to enable the purchaser to file proper reports.

Source Note:The provisions of this §3.37 adopted to be effective October 18, 1990, 15 TexReg 5853.