LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          March 27, 1995



 TO:     Honorable Bill Sims, Chair             IN RE:  Senate Bill No. 905
         Committee on Natural Resources                 By: Ellis
         Senate
         Austin, Texas






FROM: John Keel, Director

In response to your request for a Fiscal Note on Senate Bill No.
905 (Relating to royalty rates applicable to certain oil and gas
properties on public lands.) this office has determined the
following:

The bill would allow the School Land Board to provide royalty
rate reductions for certain marginal oil and gas wells on leased
state-owned land.  Under this bill, the royalty rate for certain
qualifying leases could be reduced from the current floor of
12.5% to 6.25% as an economic incentive for well owners to
continue producing and providing income for the Permanent School
Fund (PSF) . 

The General Land Office estimates that the bill would provide a
net benefit for the PSF through increased royalty and interest
income in addition to increased severance and property tax
revenues.  However, any gain due to royalties recovered from
otherwise nonproductive wells, as well as any offsetting loss of
royalty revenue due to the rate reduction, cannot be accurately
estimated.


The fiscal implication to  the State cannot be determined.

No fiscal implication to units of local government is
anticipated.


Source:   General Land Office and Veterans' Land Board
          LBB Staff: JK, KW, DF