LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session February 2, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: SB290 by Brown, J.E. "Buster" (Relating to a temporary exemption from the severance tax for oil and gas produced from wells under certain market conditions), As Introduced ************************************************************************** * Two-year Net Impact to General Revenue Related Funds for SB290, As * * Introduced: negative impact of $(45,000,000) through the biennium * * ending August 31, 2001. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Six-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * $(45,000,000) * **************************************************** All Funds, Six-Year Impact: *************************************************************************** *Fiscal Probable Revenue Gain/(Loss) Probable Revenue Gain/(Loss) * * Year from General Revenue Fund from Foundation School Fund * * 0001 0193 * * 1999 $(33,750,000) $(11,250,000) * * 2000 0 0 * * 2001 0 0 * * 2002 0 0 * * 2003 0 0 * * 2004 0 0 * *************************************************************************** Technology Impact None. Fiscal Analysis The bill would create a temporary severance tax exemption for crude oil and natural gas production that would expire on the earlier of September 1, 1999 or the date on which the sum of the exemptions granted totals $45 million. The natural gas tax exemption provision would begin, if the Comptroller certified that during any three-month period, beginning November 1, 1998, the average closing price of natural gas on the New York Mercantile Exchange (NYMEX) was below $1.80 per million cubic feet of gas. Under such circumstances, gas production during the period February 1, 1999 to July 31, 1999 would be eligible for exemption. The oil production tax exemption provision would begin, if the Comptroller certified that during any three-month period , beginning November 1, 1998, the average closing price of West Texas Intermediate crude oil on the NYMEX was below $15.00 per barrel. Should this occur, crude oil production during the period February 1, 1999 to July 31, 1999 from wells producing less than 15 barrels per day would be eligible for exemption. There would be no significant administrative costs to the Comptroller's Office or the Railroad Commission. Methodology Analyses provided by the Comptroller's Office and the Railroad Commission are the bases of this estimate. Local Government Impact Local government could benefit by the legislation to the extent that mineral property tax valuations are maintained or increased by the natural gas or crude oil production induced by the tax exemption provisions. Source Agencies: 304 Comptroller Of Pub Accts, 455 Railroad Commission LBB Staff: JK, BB, BR, CT