LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 76th Regular Session
  
                              April 27, 1999
  
  
          TO:  Honorable Ron Lewis, Chair, House Committee on Energy
               Resources
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB 1731 by Brown, J. E. "Buster" (Relating to the period
               during which the School Land Board may reduce the royalty
               rate under certain oil and gas leases.), As Engrossed
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB1731, As Engrossed:  positive impact of $0 through the biennium     *
*  ending August 31, 2001.                                               *
**************************************************************************
  
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                                    0  *
          *       2004                                    0  *
          ****************************************************
  
All Funds, Five-Year Impact:
  
         *****************************************************
         * Fiscal Year    Probable Revenue Gain/(Loss) from   *
         *                      Permanent School Fund         *
         *                              0044                  *
         *      2000                                 $500,000 *
         *      2001                                  500,000 *
         *      2002                                  500,000 *
         *      2003                                  500,000 *
         *      2004                                  500,000 *
         *****************************************************
  
Fiscal Analysis
  
The bill would allow the School Land Board (Board) to prescribe the
length of time, beyond the current law scope (limited to a two-year time
period with an option to extend relief every two years with board
approval), that a qualifying well would be eligible for a reduced
royalty rate.  This would allow the Board to grant temporary royalty
relief for state-owned oil and gas wells with marginal production levels
as defined in statute.
  
  
Methodology
  
There are an estimated 2,900 marginal oil wells and 700 marginal gas
wells on state-owned lands.  Average daily production from the oil wells
is 2.5 barrels while average gas well production is 46 mcf daily.  The
total value of production from these wells is $51 million each year of
which the Permanent School Fund receives an annual royalty share of
$5.16 million.  General Land Office (GLO) mineral leasing staff estimate
that approximately 10 percent of these marginal wells are plugged each
year.  The GLO staff also estimate that postponing abandonment of these
wells could produce an additional $500,000 in revenue to the Permanent
School Fund annually.
  
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   305   General Land Office and Veterans' Land Board
LBB Staff:         JK, DE, TT