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S.B. 1985

S.B. No. 1985

AN ACT

relating to the appraisal for ad valorem tax purposes of a real
property interest in oil or gas in place.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 23.175(a), Tax Code, is amended to read
as follows:
(a) If a real property interest in oil or gas in place is
appraised by a method that takes into account the future income from
the sale of oil or gas to be produced from the interest, the method
must use the average price of the oil or gas from the interest for
the preceding calendar year multiplied by a price adjustment factor
as the price at which the oil or gas produced from the interest is
projected to be sold in the current year of the appraisal. The
average price for the preceding calendar year is calculated by
dividing the sum of the monthly average prices for which oil and gas
from the interest was selling during each month of the preceding
calendar year by 12. If there was no production of oil or gas from
the interest during any month of the preceding calendar year, the
average price for which similar oil and gas from comparable
interests was selling during that month is to be used. Except as
otherwise provided by this subsection, the [The] chief appraiser
shall calculate the price adjustment factor by dividing the spot
price of West Texas Intermediate [imported low-sulfur light] crude
oil in nominal dollars per barrel or the spot price of natural gas
at the Henry Hub in nominal dollars per million British thermal
units, as applicable, as projected for the current calendar year by
the United States Energy Information Administration in the most
recently published edition [Early Release Overview] of the Annual
Energy Outlook by the spot price of West Texas Intermediate
[imported low-sulfur light] crude oil in nominal dollars per barrel
or the spot price of natural gas at the Henry Hub in nominal dollars
per million British thermal units, as applicable, for the preceding
calendar year as stated in the same report. If as of March 1 of the
current calendar year the most recently published edition of the
Annual Energy Outlook was published before December 1 of the
preceding calendar year, the chief appraiser shall use the
projected current and preceding calendar year spot price of West
Texas Intermediate crude oil in nominal dollars per barrel or the
spot price of natural gas at the Henry Hub in nominal dollars per
million British thermal units, as applicable, as stated in the
Short-Term Energy Outlook report published in January of the
current calendar year by the United States Energy Information
Administration in the price adjustment factor calculations. The
price for the interest used in the second through the sixth calendar
year of the appraisal may not reflect an annual escalation or
de-escalation rate that exceeds the average annual percentage
change from 1982 to the most recent year for which the information
is available in the producer price index for domestically produced
petroleum or for natural gas, as applicable, as published by the
Bureau of Labor Statistics of the United States Department of
Labor. The price for the interest used in the sixth calendar year
of the appraisal must be used in each subsequent year of the
appraisal.
SECTION 2. This Act applies only to the appraisal for ad
valorem tax purposes of a real property interest in oil or gas in
place for a tax year beginning on or after the effective date of
this Act.
SECTION 3. This Act takes effect January 1, 2016.

______________________________ ______________________________
President of the Senate Speaker of the House

I hereby certify that S.B. No. 1985 passed the Senate on
April 14, 2015, by the following vote: Yeas 31, Nays 0.

______________________________
Secretary of the Senate

I hereby certify that S.B. No. 1985 passed the House on
April 23, 2015, by the following vote: Yeas 137, Nays 2, two
present not voting.

______________________________
Chief Clerk of the House

Approved:

______________________________
Date

______________________________
Governor

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