Enhanced Oil Recovery (EOR) Tax Incentives

Under the current version of the incentive, oil produced from an approved new enhanced oil recovery project or expansion of an existing project is eligible for a special EOR tax rate of 2.3 percent of the production’s market value (one-half of the standard rate) for 10 years after Commission certification of production response. For the expansion of an existing project, the reduced rate is applied to the incremental increase in production after response certification. (See Tax Code, §202.054, Qualification of Oil from New or Expanded Enhanced Recovery Project for Special Tax Rate, 16 Tex. Admin. Code §3.50) 

• EOR Project (Form H-12)
• Positive Production Response (Form H-13)
• EOR Annual Report (Form H-14)

Plugging Deadline Extension

Operators of an active EOR Project approved by the Commission under Statewide Rule 50 may be eligible to extend the deadline for plugging an inactive land well by filing a W-3X with Option E selected, "The well identified above is part of a Commission-approved EOR Project." A lease or unit with permitted active injection wells and/or a unitization for secondary or enhanced recovery are not Commission-approved EOR projects unless they are also certified under Rule 50 though the filing and approval of Forms H-12 and H-13.

An EOR project is considered active under Rule 50 by "[t]he start and continuation of a fluid injection program for a secondary or tertiary recovery project to enhance the displacement process in the reservoir. Applying for permits and moving equipment into the field alone are not considered active operations."