LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
                                Revision 1
  
                             February 5, 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 natural gas
               production and oil production tax exemption), Committee
               Report 1st House, Substituted
  
**************************************************************************
*  Two-year Net Impact to General Revenue Related Funds for SB290,       *
*  Committee Report 1st House, Substituted:  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, Five-Year Impact:
  
          ****************************************************
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       1999                        $(45,000,000)  *
          *       2000                                    0  *
          *       2001                                    0  *
          *       2002                                    0  *
          *       2003                                    0  *
          ****************************************************
  
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 *
***************************************************************************
  
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 MMBtu.  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, CT