LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 24, 2001
TO: Honorable Ron E. Lewis, Chair, House Committee on Energy
Resources
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB310 by Harris (Relating to the continuation and
functions of the Railroad Commission of Texas.), As
Engrossed
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB310, As Engrossed: negative impact of $(2,970,000) through the *
* biennium ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(1,485,000) *
* 2003 (1,485,000) *
* 2004 (1,485,000) *
* 2005 (1,485,000) *
* 2006 (1,485,000) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Change in *
* Year Savings/(Cost) Revenue Savings/(Cost) Number of State *
* from General Gain/(Loss) from Oil Field Employees from *
* Revenue Fund from Oil Field Cleanup FY 2001 *
* 0001 Cleanup Account/ *
* Account/ GR-Dedicated *
* GR-Dedicated 0145 *
* 0145 *
* 2002 $(1,485,000) $9,065,280 $(7,968,202) 13.0 *
* 2003 (1,485,000) 9,085,280 (10,027,699) 21.2 *
* 2004 (1,485,000) 9,085,280 (9,054,585) 21.2 *
* 2005 (1,485,000) 9,085,280 (9,054,585) 21.2 *
* 2006 (1,485,000) 9,085,280 (9,051,077) 21.2 *
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Technology Impact
The bill would require new personal computers for the additional FTEs.
Fiscal Analysis
The bill would continue the Railroad Commission (RRC) for 12 years. The
bill would also do the following:
* Raise rates on oil regulatory fees from 5/16 of a cent to 5/8 of one
cent per barrel of 42 standard gallons.
* Raise rates on gas regulatory fees from 1/30 of a cent to 1/15 of a
cent per thousand cubic feet.
* Increases fee for drilling permits by $100.
* Add a non-refundable fee of $200 when Rule 37 spacing or Rule 38
density exception review is
requested.
* Increases expedite request fees from $50 to $150.
* Raise extension of time to plug a well application fees from $100 to
$300.
* Changes the fee for "good guy option" from $100 to $1,000 and
changes the nonrefundable annual fee from 3% to 12 1/2% for a bond that
would otherwise be required.
* Raise the Oil Field Cleanup Account (OFCU) cap from $10 to $20 million
and raise the floor from $6 million to $10 million.
* Require the RRC to establish performance goals for site investigations
and environmental assessments; abandoned wells to be plugged; and
surface locations to be remediated.
* Require the RRC to perform risk assessment and prioritization of high
risk wells and periodic testing high risk wells.
* Require the RRC to establish a Voluntary Cleanup program.
* Requires organization report filed to be accompanied by a fee not to
exceed $1,000.
* Amends fees for Exception to RRC rules from $50 to $150. Two-thirds
of fee shall be deposited to OFCU.
* Amends fluid injection fee from $100 to $200 and permit to discharge
to surface water fees from $200 to $300.
* Requires the utility division of the State Office of Administrative
Hearings (SOAH) to conduct contested case hearings.
Methodology
The RRC estimates revenue gains and losses to the OFCU that would result
in an annual net gain to the OFCU of approximately $9 million annually.
The breakdown is as follows:
* Rate raises on oil regulatory fees would generate an additional $1.5
million;
* Rate raises on gas regulatory fees would generate an additional $1.3
million;
* Increase in application fees by $100 would generate an additional $1
million;
* Rule 37 or 38 non refundable fee would generate new revenue of $5,000;
* Increase for expedite fees from $50 to $150 would generate an
additional $650,000;
* Changes from $100 to $300 for an extension of time to plug that would
increase revenue by $500,000;
* In regard to the change of fee from $100 to $1,000 for the "good guy
option" and the changes for the nonrefundable annual fee from 3% to 12
1/2%, the RRC assumes that bonding options being used would cause a
revenue reduction of $101,000 each year. A revenue change is not expected
for the bonding option change from 3% to 12 1/2%.
* Voluntary Cleanup fees would generate $40,000 in FY 2002 and $60,000
in FY 2003;
* Increase in organization report fees would generate an additional $3.5
million each year in additional revenue.
* Exception to RRC rule fees would generate an additional $468,000 each
year.
* Increase in fluid injection fee would generate an additional $220,000
each year and surface discharge fee increases would generate an
additional $10,000 per year.
RRC estimates that they would be able to plug an additional 748 wells in
FY 2002 and an additional 1,003 wells in FY 2003. The RRC estimates that
they would require contractual services of $3.3 million for well plugging
in FY 2002 and $4.5 million in FY 2003. The contractual amount is based
on $4,473 per well plugged.
RRC estimates that they would be able to perform an additional 85 site
cleanups in FY 2002 and an additional 109 sites cleanups in FY 2003. RRC
estimates that they would require $1.9 million for contractual services
for site cleanup in FY 2002 and $2.4 million in FY 2003. Each
contractual site cleanup is projected to cost $22,000. The site cleanups
will also require $84,845 and $196,094 of temporary employee services
for FY 2002 and FY 2003 respectively.
According to the RRC, the additional well plugging and site cleanup would
require 8 new FTEs (Engineer Specialists) in FY 2002 at a cost of
$280,000 and 16.25 new FTEs (Engineer Specialists) in FY 2003 at a cost
of $569,000. The new FTEs would require field equipment, vehicles and
computer equipment. There would also be operating and travel expenses.
RRC estimates that in FY 2004-05 the number of wells plugged will be
increased by 149 and the number of sites cleaned will be increased by 16
for a total increase in expenditures of $1,018,477 out of OFCU each year.
In FY 2006 the RRC estimates that an additional 150 wells will be
plugged and additional 16 sites will be cleaned for an increase of
$1,022,950 in expenditures out of OFCU.
RRC estimates that the requirement that the RRC perform risk assessment
and prioritization of high risk wells and periodic testing of high risk
wells would require 3 FTEs and would cost approximately $1.9 million each
year. RRC anticipates that it will require 3 FTEs (Engineer
Technicians), at a cost of $100,000. These FTEs would periodically test
the high risk wells by conducting a fluid level or pressure test. The
additional FTEs will also require field equipment and vehicles estimated
to be $100,000. There are approximately 17,000 abandoned wells in the
state and it is estimated that 3 FTEs can perform 2,833 fluid level tests
per year. In addition, the RRC estimates that it will require
contractual services of $1.7 million per year to perform the more
expensive pressure tests. It is estimated that one-half of the wells will
require pressure tests at a cost of $1,200 per well for a total of $1.7
million.
RRC estimates that the costs for establishing a Voluntary Cleanup program
in order to assist and provide technical oversight would require 1 FTE
each year and would cost approximately $84,000 in the first year and
approximately $55,000 each subsequent year.
Requires the utility division of the State Office of Administrative
Hearings to conduct each hearing in a contested case of the RRC.
According to the RRC, hearings examiners at the Office of the Attorney
General spent a total of approximately 16,500 hours on hearing dockets.
It would cost the RRC $1,485,000 to have SOAH perform the same functions
as SOAH's current billing rate of $90.00 per hour. Transferring
contested case hearing function to SOAH would require RRC to retain
staff since they will still be a party to the hearings which could be
done with existing resources.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 455 Railroad Commission of Texas, 360 State
Office of Administrative Hearings, 116 Sunset
Advisory Commission
LBB Staff: JK, CL, SK