0001| SENATE BILL 974
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0002| 43rd legislature - STATE OF NEW MEXICO - first session, 1997
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0003| INTRODUCED BY
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0004| ROD ADAIR
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0005|
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0006|
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0007|
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0008|
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0009|
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0010| AN ACT
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0011| RELATING TO TAXATION; PROVIDING FOR AN EXEMPTION FROM THE OIL
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0012| AND GAS SEVERANCE TAX FOR THREE YEARS FOR A WILDCAT WELL
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0013| PROJECT PURSUANT TO THE PROVISIONS OF THE NATURAL GAS AND CRUDE
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0014| OIL PRODUCTION INCENTIVE ACT; AMENDING SECTIONS OF THE NMSA
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0015| 1978.
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0016|
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0017| BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
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0018| Section 1. Section 7-29-2 NMSA 1978 (being Laws 1959,
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0019| Chapter 52, Section 2, as amended) is amended to read:
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0020| "7-29-2. DEFINITIONS.--As used in the Oil and Gas
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0021| Severance Tax Act:
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0022| A. "commission", "department", "division" or "oil
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0023| and gas accounting division" means the taxation and revenue
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0024| department, the secretary of taxation and revenue or any
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0025| employee of the department exercising authority lawfully
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0001| delegated to that employee by the secretary;
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0002| B. "production unit" means a unit of property
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0003| designated by the department from which products of common
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0004| ownership are severed;
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0005| C. "severance" means the taking from the soil of
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0006| any product in any manner whatsoever;
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0007| D. "value" means the actual price received for
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0008| products at the production unit, except as otherwise provided
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0009| in the Oil and Gas Severance Tax Act;
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0010| E. "product" or "products" means oil, natural gas
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0011| or liquid hydrocarbon, individually or any combination thereof,
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0012| or carbon dioxide;
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0013| F. "operator" means any person:
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0014| (1) engaged in the severance of products from
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0015| a production unit; or
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0016| (2) owning an interest in any product at the
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0017| time of severance who receives a portion or all of such product
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0018| for his interest;
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0019| G. "primary recovery" means the displacement of oil
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0020| and of other liquid hydrocarbons removed from natural gas at or
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0021| near the wellhead from an oil well or pool as classified by the
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0022| oil conservation division of the energy, minerals and natural
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0023| resources department pursuant to Paragraph (11) of Subsection B
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0024| of Section 70-2-12 NMSA 1978 into the well bore by means of the
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0025| natural pressure of the oil well or pool, including but not
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0001| limited to artificial lift;
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0002| H. "purchaser" means a person who is the first
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0003| purchaser of a product after severance from a production unit,
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0004| except as otherwise provided in the Oil and Gas Severance Tax
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0005| Act;
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0006| I. "person" means any individual, estate, trust,
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0007| receiver, business trust, corporation, firm, co-partnership,
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0008| cooperative, joint venture, association or other group or
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0009| combination acting as a unit, and the plural as well as the
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0010| singular number;
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0011| J. "interest owner" means a person owning an entire
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0012| or fractional interest of whatsoever kind or nature in the
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0013| products at the time of severance from a production unit, or
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0014| who has a right to a monetary payment that is determined by the
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0015| value of such products;
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0016| K. "new production natural gas well" means a
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0017| producing crude oil or natural gas well proration unit that
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0018| begins its initial natural gas production on or after May 1,
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0019| 1987 as determined by the oil conservation division of the
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0020| energy, minerals and natural resources department;
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0021| L. "qualified enhanced recovery project", prior to
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0022| January 1, 1994, means the use or the expanded use of carbon
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0023| dioxide, when approved by the oil conservation division of the
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0024| energy, minerals and natural resources department pursuant to
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0025| the Enhanced Oil Recovery Act, for the displacement of oil and
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0001| of other liquid hydrocarbons removed from natural gas at or
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0002| near the wellhead from an oil well or pool classified by the
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0003| oil conservation division pursuant to Paragraph (11) of
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0004| Subsection B of Section 70-2-12 NMSA 1978;
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0005| M. "qualified enhanced recovery project", on and
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0006| after January 1, 1994, means the use or the expanded use of any
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0007| process approved by the oil conservation division of the
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0008| energy, minerals and natural resources department pursuant to
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0009| the Enhanced Oil Recovery Act for the displacement of oil and
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0010| of other liquid hydrocarbons removed from natural gas at or
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0011| near the wellhead from an oil well or pool classified by the
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0012| oil conservation division pursuant to Paragraph (11) of
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0013| Subsection B of Section 70-2-12 NMSA 1978, other than a primary
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0014| recovery process; the term includes but is not limited to the
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0015| use of a pressure maintenance process, a water flooding process
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0016| and immiscible, miscible, chemical, thermal or biological
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0017| process or any other related process;
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0018| N. "production restoration project" means the use
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0019| of any process for returning to production a natural gas or oil
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0020| well that had thirty days or less of production between January
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0021| 1, 1993 and December 31, 1994, as approved and certified by the
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0022| oil conservation division of the energy, minerals and natural
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0023| resources department pursuant to the Natural Gas and Crude Oil
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0024| Production Incentive Act;
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0025| O. "well workover project" means any procedure
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0001| undertaken by the operator of a natural gas or crude oil well
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0002| that is intended to increase the production from the well and
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0003| that has been approved and certified by the oil conservation
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0004| division of the energy, minerals and natural resources
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0005| department pursuant to the Natural Gas and Crude Oil Production
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0006| Incentive Act; [and]
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0007| P. "tax" means the oil and gas severance tax; and
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0008| Q. "wildcat well project" means the drilling of a
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0009| well in search of oil or natural gas accumulations located in a
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0010| nonproductive area or away from a known area of production, as
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0011| approved and certified by the oil conservation division of the
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0012| energy, minerals and natural resources department pursuant to
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0013| the Natural Gas and Crude Oil Production Incentive Act."
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0014| Section 2. Section 7-29-4 NMSA 1978 (being Laws 1980,
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0015| Chapter 62, Section 5, as amended) is amended to read:
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0016| "7-29-4. OIL AND GAS SEVERANCE TAX IMPOSED--
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0017| COLLECTION--INTEREST OWNER'S LIABILITY TO STATE--INDIAN
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0018| LIABILITY.--
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0019| A. There is imposed and shall be collected by the
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0020| department a tax on all products that are severed and sold,
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0021| except as provided in Subsection B of this section. The
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0022| measure of the tax and the rates are:
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0023| (1) on natural gas severed and sold, except as
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0024| provided in Paragraph (4) of this subsection, three and
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0025| three-fourths percent of the taxable value determined under
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0001| Section 7-29-4.1 NMSA 1978;
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0002| (2) on oil and on other liquid hydrocarbons
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0003| removed from natural gas at or near the wellhead, except as
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0004| provided in Paragraphs (3) and (5) of this subsection, three
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0005| and three-fourths percent of taxable value determined under
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0006| Section 7-29-4.1 NMSA 1978;
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0007| (3) on oil and on other liquid hydrocarbons
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0008| removed from natural gas at or near the wellhead produced from
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0009| a qualified enhanced recovery project, one and seven-eighths
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0010| percent of the taxable value determined under Section 7-29-4.1
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0011| NMSA 1978, provided that the annual average price of west Texas
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0012| intermediate crude oil, determined by the department by
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0013| averaging the posted prices in effect on the last day of each
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0014| month of the twelve-month period ending on May 31 prior to the
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0015| fiscal year in which the tax rate is to be imposed, was less
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0016| than twenty-eight dollars ($28.00) per barrel;
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0017| (4) on the natural gas from a well workover
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0018| project that is in excess of the production projection
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0019| certified by the oil conservation division of the energy,
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0020| minerals and natural resources department in its approval of
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0021| the well workover project, one and seven-eighths percent of the
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0022| taxable value determined under Section 7-29-4.1 NMSA 1978,
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0023| provided that the annual average price of west Texas
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0024| intermediate crude oil, determined by the department by
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0025| averaging the posted prices in effect on the last day of each
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0001| month of the twelve-month period ending on May 31 prior to the
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0002| fiscal year in which the tax rate is to be imposed, was less
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0003| than twenty-four dollars ($24.00) per barrel;
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0004| (5) on the oil and other liquid hydrocarbons
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0005| removed from natural gas at or near the wellhead from a well
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0006| workover project that is in excess of the production projection
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0007| certified by the oil conservation division of the energy,
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0008| minerals and natural resources department in its approval of
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0009| the well workover project, one and seven-eighths percent of the
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0010| taxable value determined under Section 7-29-4.1 NMSA 1978,
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0011| provided that the annual average price of west Texas
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0012| intermediate crude oil, determined by the department by
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0013| averaging the posted prices in effect on the last day of each
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0014| month of the twelve-month period ending on May 31 prior to the
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0015| fiscal year in which the tax rate is to be imposed, was less
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0016| than twenty-four dollars ($24.00) per barrel; and
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0017| (6) on carbon dioxide, three and three-fourths
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0018| percent of the taxable value determined under Section 7-29-4.1
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0019| NMSA 1978.
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0020| B. The tax imposed in Subsection A of this section
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0021| shall not be imposed on:
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0022| (1) natural gas severed and sold from:
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0023| (a) a production restoration project
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0024| during the first ten years of production following the
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0025| restoration of production, provided that the annual average
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0001| price of west Texas intermediate crude oil, determined by the
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0002| department by averaging the posted prices in effect on the last
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0003| day of each month of the twelve-month period ending on May 31
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0004| prior to each fiscal year in which the tax exemption is to be
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0005| effective, was less than twenty-four dollars ($24.00) per
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0006| barrel; and
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0007| (b) a wildcat well project during the
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0008| first three years of production; and
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0009| (2) oil and other liquid hydrocarbons removed
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0010| from natural gas at or near the wellhead from:
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0011| (a) a production restoration project
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0012| during the first ten years of production following the
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0013| restoration of production, provided that the annual average
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0014| price of west Texas intermediate crude oil, determined by the
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0015| department by averaging the posted prices in effect on the last
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0016| day of each month of the twelve-month period ending on May 31
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0017| prior to each fiscal year in which the tax exemption is to be
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0018| effective, was less than twenty-four dollars ($24.00) per
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0019| barrel; and
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0020| (b) a wildcat well project during the
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0021| first three years of production.
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0022| C. Every interest owner shall be liable for the tax
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0023| to the extent of his interest in such products. Any Indian
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0024| tribe, Indian pueblo or Indian shall be liable for the tax to
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0025| the extent authorized or permitted by law.
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0001| D. The tax imposed by this section may be referred
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0002| to as the "oil and gas severance tax"."
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0003| Section 3. Section 7-29B-2 NMSA 1978 (being Laws 1995,
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0004| Chapter 15, Section 2) is amended to read:
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0005| "7-29B-2. DEFINITIONS.--As used in the Natural Gas and
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0006| Crude Oil Production Incentive Act:
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0007| A. "department" means the taxation and revenue
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0008| department;
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0009| B. "division" means the oil conservation division
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0010| of the energy, minerals and natural resources department;
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0011| C. "natural gas" means any combustible vapor
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0012| composed chiefly of hydrocarbons occurring naturally;
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0013| D. "operator" means the person responsible for the
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0014| actual physical operation of a natural gas or oil well;
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0015| E. "person" means any individual or other legal
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0016| entity, including any group or combination of individuals or
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0017| other legal entities acting as a unit;
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0018| F. "production projection" means the estimate of
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0019| the productive capacity of a natural gas or oil well that is
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0020| certified by the division pursuant to the provisions of the
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0021| Natural Gas and Crude Oil Production Incentive Act as the
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0022| future rate of production from the well prior to the operator
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0023| of the well performing a well workover project on the well;
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0024| G. "production restoration incentive tax exemption"
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0025| means the tax exemption set forth in Subsection B of Section
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0001| 7-29-4 NMSA 1978 for natural gas or oil produced from a
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0002| production restoration project;
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0003| H. "production restoration project" means the use
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0004| of any process for returning to production a natural gas or oil
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0005| well that had thirty days or less of production between January
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0006| 1, 1993 and December 31, 1994 as approved and certified by the
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0007| division;
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0008| I. "severance" means the taking from the soil of
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0009| any product in any manner whatsoever;
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0010| J. "well workover incentive tax rate" means the tax
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0011| rate set forth in Paragraphs (4) and (5) of Subsection A of
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0012| Section 7-29-4 NMSA 1978 on the natural gas or oil produced in
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0013| excess of the production projection from a well workover
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0014| project; [and]
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0015| K. "well workover project" means any procedure
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0016| undertaken by the operator of a natural gas or oil well that is
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0017| intended to increase the production from the well and that has
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0018| been approved and certified by the division;
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0019| L. "wildcat well incentive tax exemption" means the
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0020| tax exemption set forth in Subsection B of Section 7-29-4 NMSA
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0021| 1978 for natural gas or oil produced from a wildcat well
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0022| project; and
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0023| M. "wildcat well project" means the drilling of a
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0024| well in search of oil or natural gas accumulations located in a
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0025| nonproductive area or away from a known area of production."
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0001| Section 4. Section 7-29B-3 NMSA 1978 (being Laws 1995,
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0002| Chapter 15, Section 3) is amended to read:
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0003| "7-29B-3. APPROVAL OF PRODUCTION RESTORATION PROJECTS,
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0004| [AND] WELL WORKOVER PROJECTS AND WILDCAT WELL PROJECTS.--
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0005| A. A natural gas or oil well shall be approved by
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0006| the division as a production restoration project if:
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0007| (l) the operator of the well makes application
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0008| to the division in accordance with the provisions of the
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0009| Natural Gas and Crude Oil Production Incentive Act and rules
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0010| and regulations adopted pursuant to that act for approval of a
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0011| production restoration project; and
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0012| (2) the division records show that the well
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0013| had thirty days or less of production between January l, 1993
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0014| and December 31, 1994.
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0015| B. A natural gas or oil well shall be approved by
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0016| the division as a well workover project if:
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0017| (l) the operator of the well makes application
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0018| to the division in accordance with the provisions of the
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0019| Natural Gas and Crude Oil Production Incentive Act and rules
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0020| and regulations adopted pursuant to that act for approval of a
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0021| well workover project;
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0022| (2) the division determines that the procedure
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0023| proposed to be undertaken by the operator of the well is a
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0024| procedure intended to increase the production from the well,
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0025| but is not routine maintenance that would be performed by a
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0001| prudent operator to maintain the well in operation. Such
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0002| procedures may include, but are not limited to:
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0003| (a) re-entry into the well to drill
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0004| deeper, to sidetrack to a different location or to recomplete
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0005| for production;
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0006| (b) recompletion by reperforation of a
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0007| zone from which natural gas or oil has been produced or by
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0008| perforation of a different zone;
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0009| (c) repair or replacement of faulty or
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0010| damaged casing or related downhole equipment;
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0011| (d) fracturing, acidizing or installing
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0012| compression equipment; or
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0013| (e) squeezing, cementing or installing
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0014| equipment necessary for removal of excessive water, brine or
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0015| condensate from the well bore in order to establish, continue
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0016| or increase production from the well; and
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0017| (3) the operator of the well submits to the
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0018| division an estimate of the productive capacity of the well
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0019| based on at least twelve months of established production, and
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0020| the division, based on its verification of that estimate,
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0021| determines the future rate of production from the well prior to
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0022| the operator of the well performing the well workover project
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0023| on the well and certifies that as the production projection for
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0024| the project.
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0025| C. A natural gas or oil well shall be approved by
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0001| the division as a wildcat well project if:
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0002| (1) the operator of the well makes application
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0003| to the division in accordance with the provisions of the
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0004| Natural Gas and Crude Oil Production Incentive Act and rules
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0005| and regulations adopted pursuant to that act for approval of a
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0006| wildcat well project; and
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0007| (2) the division determines that the well has
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0008| been drilled outside a known field or is producing oil or
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0009| natural gas from an area not previously proven productive."
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0010| Section 5. Section 7-29B-4 NMSA 1978 (being Laws 1995,
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0011| Chapter 15, Section 4) is amended to read:
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0012| "7-29B-4. APPLICATION PROCEDURES--CERTIFICATION OF
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0013| APPROVAL--RULES AND REGULATIONS--ADMINISTRATION.--
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0014| A. The operator of a proposed production
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0015| restoration project, [or] well workover project or wildcat
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0016| well project shall apply to the division for approval of a
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0017| production restoration project, [or] a well workover project
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0018| or wildcat well project in the form and manner prescribed by
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0019| the division and shall provide any relevant material and
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0020| information the division requires for that approval.
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0021| B. Upon a determination that the project complies
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0022| with the provisions of the Natural Gas and Crude Oil Production
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0023| Incentive Act and rules and regulations adopted pursuant to
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0024| that act, the division shall approve the application and shall
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0025| issue a certification of approval to the operator and designate
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0001| the natural gas or oil well as a production restoration
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0002| project, [or] well workover project or wildcat well
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0003| project, as applicable.
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0004| C. At the time of issuing a certification of
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0005| approval to an operator of a natural gas or oil well for a well
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0006| workover project, the division shall also certify the
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0007| production projection for that project.
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0008| D. In addition to the powers enumerated in Section
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0009| 70-2-12 NMSA 1978, the division shall adopt, promulgate and
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0010| enforce rules and regulations to carry out the provisions of
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0011| [Sections 1 through 5 of] the Natural Gas and Crude Oil
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0012| Production Incentive Act.
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0013| E. The division shall consider and approve
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0014| applications for approval of a production restoration project,
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0015| [or] well workover project or wildcat well project without
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0016| holding hearings on the applications. If the division denies
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0017| approval of an application pursuant to such a process, the
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0018| division, upon the request of the applicant, shall set a
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0019| hearing of the application before an examiner appointed by the
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0020| division to conduct the hearing. The hearing shall be
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0021| conducted in accordance with the provisions of the Oil and Gas
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0022| Act for such hearings."
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0023| Section 6. Section 7-29B-6 NMSA 1978 (being Laws 1995,
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0024| Chapter 15, Section 6) is amended to read:
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0025| "7-29B-6. QUALIFICATION FOR PRODUCTION RESTORATION
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0001| INCENTIVE TAX EXEMPTION, WILDCAT WELL INCENTIVE TAX EXEMPTION
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0002| AND WELL WORKOVER INCENTIVE TAX RATE--SECRETARY OF TAXATION AND
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0003| REVENUE APPROVAL--REFUND.--
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0004| A. The person responsible for paying the oil and
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0005| gas severance tax on natural gas or oil produced from a
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0006| production restoration project shall qualify to receive a
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0007| ten-year production restoration incentive tax exemption upon:
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0008| (l) application to the department in the form
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0009| and manner prescribed by the department for approval for the
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0010| ten-year production restoration incentive tax exemption;
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0011| (2) submission of the certification of
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0012| approval from the division and designation of the natural gas
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0013| or oil well as a production restoration project; and
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0014| (3) submission of any other relevant material
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0015| that the secretary of taxation and revenue deems necessary to
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0016| administer the applicable provisions of the Natural Gas and
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0017| Crude Oil Production Incentive Act.
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0018| B. The person responsible for payment of the oil
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0019| and gas severance tax on natural gas or oil produced from a
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0020| well workover project shall qualify for the well workover
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0021| incentive tax rate on the natural gas or oil produced in excess
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0022| of the production projection for that project upon:
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0023| (l) application to the department in the form
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0024| and manner prescribed by the department for approval to apply
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0025| the well workover incentive tax rate to the natural gas or oil
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0001| produced in excess of the production projection from a well
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0002| workover project;
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0003| (2) submission of the certification from the
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0004| division of approval and designation of the natural gas or oil
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0005| well as a well workover project and of the production
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0006| projection for the well workover project; and
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0007| (3) any other relevant material that the
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0008| department considers necessary to administer the applicable
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0009| provisions of the Natural Gas and Crude Oil Production
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0010| Incentive Act.
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0011| C. The person responsible for paying the oil and
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0012| gas severance tax on natural gas or oil produced from a wildcat
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0013| well project shall qualify to receive a three-year wildcat well
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0014| incentive tax exemption upon:
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0015| (1) application to the department in the form
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0016| and manner prescribed by the department for approval for the
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0017| three-year wildcat well incentive tax exemption;
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0018| (2) submission of the certification of
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0019| approval from the division and designation of the natural gas
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0020| or oil well as a wildcat well project; and
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0021| (3) submission of any other relevant material
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0022| that the secretary of taxation and revenue deems necessary to
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0023| administer the applicable provision of the Natural Gas and
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0024| Crude Oil Production Incentive Act.
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0025| [C.] D. The production restoration incentive
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0001| tax exemption shall apply to natural gas or oil produced from a
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0002| production restoration project beginning the first day of the
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0003| month following the date the division certifies that production
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0004| has been restored and ending the last day of the tenth year of
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0005| production following that date. The well workover incentive
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0006| tax rate applies to the natural gas or oil produced in excess
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0007| of the production projection from a well workover project
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0008| beginning the first day of the month following the date the
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0009| division certifies that the well workover project has been
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0010| completed. The wildcat
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0011| well incentive tax exemption shall apply to natural gas or oil
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0012| produced from a wildcat well project beginning the first day of
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0013| the month following the date the division certifies that the
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0014| production has begun and ending the last day of the third year
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0015| of production following that date.
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0016| [D.] E. The person responsible for payment of
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0017| the oil and gas severance tax on natural gas or oil production
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0018| from an approved well workover project may file a claim for
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0019| refund in accordance with Section 7-1-26 NMSA 1978 for taxes
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0020| paid in excess of the amount due using the well workover
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0021| incentive tax rate. Notwithstanding the provisions of
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0022| Subsection E of Section 7-1-26 NMSA 1978, any such refund
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0023| granted shall be made in the form of a credit against any
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0024| future oil and gas severance tax liabilities incurred by the
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0025| taxpayer.
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0001| [E.] F. The secretary of taxation and revenue
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0002| may adopt and promulgate rules and regulations to enforce the
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0003| provisions of this section."
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0004| Section 7. EFFECTIVE DATE.--The effective date of the
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0005| provisions of this act is July 1, 1997.
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0006|
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0007|
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0008| FORTY-THIRD LEGISLATURE
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0009| FIRST SESSION, 1997
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0010|
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0011|
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0012| March 4, 1997
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0013|
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0014| Mr. President:
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0015|
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0016| Your CORPORATIONS & TRANSPORTATION COMMITTEE, to
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0017| whom has been referred
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0018|
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0019| SENATE BILL 974
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0020|
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0021| has had it under consideration and reports same with
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0022| recommendation that it DO PASS, and thence referred to the
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0023| FINANCE COMMITTEE.
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0024|
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0025| Respectfully submitted,
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0001|
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0002|
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0003|
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0004|
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0005| __________________________________
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0006| Roman M. Maes, III, Chairman
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0007|
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0008|
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0009|
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0010| Adopted_______________________ Not
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0011| Adopted_______________________
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0012| (Chief Clerk) (Chief Clerk)
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0013|
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0014|
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0015| Date ________________________
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0016|
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0017|
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0018| The roll call vote was 8 For 0 Against
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0019| Yes: 8
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0020| No: 0
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0021| Excused: Fidel, Robinson
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0022| Absent: None
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0023|
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0024|
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0025| S0974CT1
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0001|
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