LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
April 12, 1999
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB2615 by Counts (relating to the application of the oil
and gas severance taxes to high-cost gas production and
inactive oil and gas leases), Committee Report 1st
House, Substituted
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* Estimated Two-Year Net Impact to General Revenue Related Funds for *
* HB2615, Committee Report 1st House, Substituted: impact of $0 *
* through the biennium ending August 31, 2001. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $0 *
* 2001 0 *
* 2002 0 *
* 2003 (7,759,000) *
* 2004 (14,341,000) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Revenue Gain/(Loss) Probable Revenue Gain/(Loss) *
* Year from General Revenue Fund from Foundation School Fund *
* 0001 0193 *
* 2000 $0 $0 *
* 2001 0 0 *
* 2002 0 0 *
* 2003 (5,819,000) (1,940,000) *
* 2004 (10,756,000) (3,585,000) *
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Fiscal Analysis
The bill would extend the expiration dates for natural gas and crude oil
tax relief under the high-cost gas program and the two-year inactive well
program. The deadline to drill a qualifying gas well in the high-cost
gas program would be extended to September 1, 2010 from September 1,
2002.
The bill would extend the Railroad Commission's certification date for
two-year inactive wells to February 29, 2010 from February 29, 2000, as
well as the two-year inactive well application period to August 31, 2009
from August 31, 1999.
Methodology
This estimate is based on a fiscal impact analysis prepared by the
Comptroller's Office.
Extension of the high-cost gas program would result in a revenue loss
from the wells that would have been drilled in fiscal 2003 and beyond
(absent the program). Comptroller staff estimated the revenue paid by
wells that would have been drilled and adjusted for the rate reduction to
these wells from extension of the high-cost gas program. The adjustment
represents a loss of revenue, since these wells would have paid the full
severance tax (7.5 percent). An offset to this loss would be revenue
from wells that would only be drilled in response to the extension of the
high-cost gas program. Production from these wells would pay severance
tax, albeit at a rate less than 7.5 percent.
Extension of the two-year inactive well program creates a revenue loss to
the state. Oil or gas wells would have to have been out of production
for at least two years prior to application to qualify for the severance
tax exemption. Production from such wells, therefore, is not included
in the Comptroller's estimates.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Oil and/or natural gas wells drilled or kept in production by the
provisions of the bill could provide local government with additional
local property tax valuations and, ultimately, additional local property
tax revenues.
Source Agencies: 455 Railroad Commission, 304 Comptroller of
Public Accounts
LBB Staff: JK, BB, BR, CT