Governor Signs Bill Suspending Tax For Returning O&G Wells To Activity

March 28, 2019
Governor Greg Abbott has signed into law a bill allowing for suspension of severance tax payments for inactive oil and gas wells that are returned to active status if they have not produced oil or gas for more than one month in the previous two years or more.

There are about 129,000 inactive wells in Texas, 90% of which have been inactive for two or more years.

That’s in part, SB 533‘s sponsor District 22 state Sen. Brian Birdwell explained when introducing his bill, because of the lack of economic viability of operating them under current oil pricing.

The law will modify the tax code by reducing the time period for tax exemption for inactive oil and natural gas wells to become productive from ten years to five years overall.

The law is essentially a revival of a law that allowed the Railroad Commission of Texas to suspend severance taxes in such cases; that law ended in 2010.

Birdwell said the goal is an incentive for well operators to bring inactive wells back into production.

The bill would also clarify the law that the tax exemption does not apply to wells used for enhanced oil recovery or wells that have been drilled but not completed and that do not have a record of production on file with the Railroad Commission, Sen. Birdwell told the Senate.

The bill also lays out penalties for lying about the length of time or other aspects of the wells in question.