Texas Legislature considers incentives for use of alternative fracking fluids

The Texas Legislature is currently considering several bills related to hydraulic fracturing and the oil and gas industry in general. Last Friday, March 13th, two additional bills were proposed in the Texas Legislature that would incentivize the use of alternative fracking fluids. The bills—H.B. 4035 and H.B. 4021—were introduced by Representative Drew Darby and Representative Abel Herrero, respectively.

H.B. 4035 proposes to establish a tax credit for oil and gas operators that use a “no water production technique” in their drilling operations. An operator utilizes a “no water production technique” if the operator “uses nitrogen, carbon dioxide, or fluids other than water.” In addition, H.B. 4035 would grant a tax credit if oil and gas operators contribute to water infrastructure and road projects in Texas. The amount of the tax credit cannot exceed $10,000.

Similarly, H.B. 4021 would grant oil and gas operators a $50,000 tax credit for each well that is operated without the use of fresh water. Under H.B. 4021, the Railroad Commission of Texas (RRC) would be responsible for maintaining a database to ensure that operators actually qualify for the tax credit. In fact, the RRC would be required to send a list to the Texas Comptroller of Public Accounts (Comptroller) of all of the well operators who qualify for the tax credit. Operators desiring to claim the tax credit would then be required to apply to the Comptroller for the credit. H.B. 4021 also authorizes the RRC to conduct random inspections to verify the information submitted by well operators.

These bills likely stem from drought concerns expressed by many parties in Texas. Several studies have concluded that certain areas in the state are experiencing a dwindling supply of groundwater.

Read H.B. 4035 and H.B. 4021.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.