LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 1, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB344 by Bivins (Relating to the rates of the gas and
oil severance taxes.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB344, As Introduced: negative impact of $(6,233,871) 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:
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* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $(6,087,630) *
* 2003 (146,241) *
* 2004 (146,241) *
* 2005 (146,241) *
* 2006 (146,241) *
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All Funds, Five-Year Impact:
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*Fiscal Probable Savings/(Cost) from Change in Number of State *
* Year General Revenue Fund Employees from FY 2001 *
* 0001 *
* 2002 $(6,087,630) 4.0 *
* 2003 (146,241) 4.0 *
* 2004 (146,241) 4.0 *
* 2005 (146,241) 4.0 *
* 2006 (146,241) 4.0 *
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Technology Impact
The bill have a technological impact cost of $6 million for programming
in fiscal year 2002 for a complete rewrite of the Oil Production and
Natural Gas Production Tax portions of the Integrated Tax System. The
re-programming would be necessary to allow the taxation of oil and
natural gas at variable tax rates. Also, annual purchases would be
necessary beginning in fiscal year 2002 for data processing equipment.
Fiscal Analysis
The bill reduces the tax rate for crude oil and natural gas, when certain
market price conditions occur.
The bill requires the Comptroller's Office to maintain a database of the
daily closing prices for natural gas and West Texas intermediate crude
oil, as reported on the New York Mercantile Exchange (NYMEX). The
Comptroller would certify and publish in the Texas Register the average
monthly closing price in each of the past three months.
The reduced rates would take effect when the monthly average NYMEX price
remained below specified threshold levels for three successive months.
The initial period for certification would begin on June 1, 2001.
After Comptroller certification of the prior three-month successive
average price, the applicable tax rates for natural gas for the following
month of production would be: 7.5 percent of the market value when the
certified price exceeded $3.00 per million British thermal units (MMBtu);
5 percent of the market value when the certified price equaled or
exceeded $1.25, but was no higher than $3.00 per MMBtu; and 2 percent of
the market value when the certified price fell below $1.25 per MMBtu.
After Comptroller certification of the prior three-month successive
average price, the applicable tax rates for crude oil for the following
month of production would be: 4.6 percent of the market value when the
certified price exceeded $20 per barrel; 2.3 percent of the market value
when the certified price equaled or exceeded $12 per barrel, but was no
higher than $20 per barrel; and 1 percent of the market value when the
certified price fell below $12 per barrel.
The bill modifies the tax rate for a new or expanded enhanced recovery
project to equal one-half of the applicable tax rate in effect for the a
given month's production.
The bill grants a taxpayer the statutory time limit under Section 111.104
to apply to the Comptroller for a credit of any taxes overpaid on crude
oil or natural gas at a rate higher than the applicable rate.
The bill would take effect September 1, 2001 and would apply to crude oil
or natural gas produced on or after that date.
Methodology
The Comptroller's Office forecasts that NYMEX prices for oil and for
natural gas are not expected to meet the $20 per barrel triggering price
for oil or the $3.00 per MMBtu triggering price for natural gas during
the next biennium, or at any time in the three fiscal years thereafter.
(Because of grade variations and certain deductions, the NYMEX price for
oil and for natural gas is higher than the taxable price in Texas.)
Consequently, no loss in revenue to the state would be anticipated from
this bill.
The administrative cost estimate reflects spending needed to re-write
Comptroller's Office oil and natural gas production tax programs, to
handle the increased workload for adjustment notices and amendments, to
respond to phone calls and taxpayer correspondence, and to verify
requests for tax refunds.
Local Government Impact
No significant fiscal implication to units of local government is
anticipated.
Source Agencies: 455 Railroad Commission of Texas, 304 Comptroller
of Public Accounts
LBB Staff: JK, SD, CT