LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                               May 16, 2001
  
  
          TO:  Honorable Gary Walker, Chair, House Committee on Land &
               Resource Management
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  SB438  by Madla (Relating to permitting the value of
               natural resources to be included in the assessment of
               damages in a condemnation proceeding in certain
               circumstances.), Committee Report 2nd House, Substituted
  
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*  No significant fiscal implication to the State is anticipated.        *
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Local Government Impact
  
The bill would require as part of a condemnation proceeding initiated by
a political subdivision, corporation with eminent domain authority, or an
irrigation, water improvement, or water power control district, that the
special commissioners or court must admit evidence relating to the
market value of the natural resources as property apart from the land in
addition to the local market value of the property if the entity proposed
to condemn the fee title of the real property and the special
commissioners or court finds that the real property may be used by the
entity to develop or use the natural resources located on or under the
real property.  The market value of the natural resources must be based
on generally accepted appraisal methods and techniques.

If damages are to be assessed to the property owner, they would have to
be based on the local market value of the real property, excluding the
market value of the natural resources at the time of the hearing, and the
market value of the natural resources on or under the real property,
determined separately from the real property at the time of the hearing.
The provisions of the bill would not authorize the natural resources to
be appraised separately from the real property for property tax appraisal
purposes or subject  the condemned real property to an additional tax.

The bill would take effect September 1, 2001, but would not affect any
litigation pending on or before that date that relates to the assessment
of damages in a condemnation proceeding under Chapter 21, Property Code.

Under current statute, the market value of natural resources on or under
the property is not included as evidence of value in determining damages
to the property owner. The provisions of the bill would result in an
increased cost to the political subdivision or other applicable entity
in property condemnation cases in which it is determined that the entity
intended to use the natural resources on or under the condemned
property. In addition to costs associated with the condemnation hearing,
the local government entity seeking the condemnation would incur the
costs of conducting land surveys to determine the value of the natural
resources and would have to pay higher damages to the property owner
than under current statute. The land surveys are estimated to cost $750
each. It is anticipated that most natural resources on condemned
property would not have an exceptionally high market value; however, the
additional costs of paying the property owner for natural resources
could be significant if the land contains substantial and high-valued
natural resources.  For example, a natural gas asset could be valued
starting at approximately $330,000. Depending on the natural resource
and the entity's usage, the local entity could possibly recoup some or
all of the expense over a period of time.
  
  
Source Agencies:   455   Railroad Commission of Texas
LBB Staff:         JK, CL, DB