LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
May 26, 2001
TO: Honorable Bill Ratliff, Lieutenant Governor
Honorable James E. "Pete" Laney, Speaker of the House
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB310 by Harris (Relating to the continuation and
functions of the Railroad Commission of Texas.),
Conference Committee Report
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB310, Conference Committee Report: negative impact of *
* $(1,122,147) 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 $(484,061) *
* 2003 (638,086) *
* 2004 (890,066) *
* 2005 (879,066) *
* 2006 (1,041,331) *
****************************************************
All Funds, Five-Year Impact:
***********************************************************************
*Fiscal Probable Probable Probable Probable Change in *
* Year Savings/ Revenue Savings/ Revenue Number of *
* (Cost) from Gain/(Loss) (Cost) from Gain/(Loss) State *
* General from Oil Field from Oil Employees *
* Revenue General Cleanup Field from FY 2001 *
* Fund Revenue Account/ Cleanup *
* 0001 Fund GR- Account/ *
* 0001 Dedicated GR- *
* 0145 Dedicated *
* 0145 *
* 2002 $(609,061) $125,000 $9,103,280 17.0 *
* $(8,074,703) *
* 2003 (763,086) 125,000 9,121,280 27.2 *
* (10,070,670) *
* 2004 (1,015,066) 125,000 (9,481,586) 9,162,280 31.2 *
* 2005 (1,004,066) 125,000 (9,139,586) 9,162,280 31.2 *
* 2006 (1,166,331) 125,000 (9,114,078) 9,162,280 33.2 *
***********************************************************************
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* Oil Field Cleanup Account/ *
* GR-Dedicated *
* 0145 *
* 2002 $(40,000) *
* 2003 (25,000) *
* 2004 (15,000) *
* 2005 (4,000,000) *
* 2006 (3,800,000) *
*****************************************************
Technology Impact
The bill would require new personal computers for the additional FTEs.
The Railroad Commission (RRC) also estimates additional programming
costs of $36,000 in FY 2002. Programming in FY 2004 is estimated at
$384,000 to implement changes resulting from universal bonding. This
estimate includes 3 contract programmers (3200 hours).
Fiscal Analysis
The bill would continue the Railroad Commission (RRC) for 12 years,
increase certain fees and assessments, increase various RRC regulatory
requirements, and require the utility division of the State Office of
Administrative Hearings (SOAH) to conduct contested case hearings
related to gas utilities.
Methodology
The RRC estimates revenue gains and losses to the Oil Field Cleanup
Account (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 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%, 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 and 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;
* Liens on abandoned well would generate an additional $38,000 in the
first year, and $36,000 in the second year and $77,000 each year
thereafter; and
* Loss from universal bonding to OFCU in FY 2005 of $4 million and $3.8
million in FY 2006.
* RRC estimates a gain to General Revenue from increase in fees for well
category determination that will generate an additional $125,000 per year
in General Revenue.
The RRC estimates the following additional responsibilities will result
in the following costs:
* 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.
* To perform an additional 85 site cleanups in FY 2002 and an additional
109 sites cleanups in FY 2003, $1.9 million for contractual services
would be required 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.
* The additional well plugging and site cleanup would require an
additional 8 FTEs (Engineer Specialists) in FY 2002 at a cost of $280,000
and an additional 16.25 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.
* 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, 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.
* The requirement that the RRC perform risk assessment and periodic
testing of high risk wells would require 3 FTEs and would cost
approximately $1.9 million each year. The RRC would require 3 FTEs
(Engineer Technicians), at a cost of $100,000. 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, contractual services of $1.7 million per year would be required
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.
* 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.
* The annual costs resulting from the transfer of all contested case
hearings related to gas utilities from the RRC to SOAH would be $247,050
per year.
* Costs for well category determination will run $125,000 per year, which
includes 1 FTE at a cost of approximately $32,000 per year plus
benefits.
* Costs for enforcement of pipeline safety include 1 FTE in a
coordinating function at a cost of $53,000 per year plus benefits and a
computer.
* Allowing municipalities to cede rate jurisdiction to the RRC would
require 2 FTEs in the first year and 2 additional FTEs in the second with
increasing FTEs in the following years. A cost of $162,265 in FY 2002
and $319,030 in FY 2003 to GR as the result of the increases in rate
cases processed per year as a result of this provision.
There should be minimal impact to review of pipeline approval process.
SOAH has indicated that 4 FTEs would be required to perform the
responsibilities of handling hearings. This would be paid to SOAH by RRC
through interagency billings. There will not be any savings to the RRC
because they will need to retain staff in the office of general counsel
since they will still be a party to the rate cases.
Local Government Impact
According to the RRC, local governments may see some negative fiscal
impact in the way of a reduction in tax revenues. Local governments may
also see a decreased tax base as a result of decreased production and
closure of other oil and gas facilities.
Source Agencies: 116 Sunset Advisory Commission, 455 Railroad
Commission of Texas, 304 Comptroller of Public
Accounts
LBB Staff: JK, CL, SK