| TO: | Honorable Kenneth Armbrister, Chair, Senate Committee on Natural Resources |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | SB1634 by Seliger (Relating to the Texas Energy Education Council; authorizing the imposition of an assessment on producers of oil, gas, and condensate.), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2006 | ($1,000,000) |
| 2007 | ($1,000,000) |
| 2008 | ($1,000,000) |
| 2009 | ($1,000,000) |
| 2010 | ($1,000,000) |
| Fiscal Year | Probable Savings/(Cost) from GENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) from New GR Dedicated - Energy Education |
|---|---|---|
| 2006 | ($1,000,000) | $1,596,000 |
| 2007 | ($1,000,000) | $2,286,000 |
| 2008 | ($1,000,000) | ($130,000) |
| 2009 | ($1,000,000) | ($58,000) |
| 2010 | ($1,000,000) | ($39,000) |
The bill as substituted would create the Texas Energy Education Council, a 13-member appointed board with the Railroad Commissioner serving as chair and the Education Commissioner serving as vice-chair. The Council would be directed to hire staff and coordinate a program of educational and job training activities designed to promote skills, research and knowledge related to oil and gas production in the state.
The bill as substituted would create the energy education account in the general revenue fund, which would consist of gifts, grants, legislative appropriations to the account, and a new assessment imposed on producers of oil, gas and condensate, starting January 1, 2006. The assessment would be equal to two-hundredths of one percent on the market value (after royalty interest) of oil, gas or condensate produced or saved in the state by the producer, not to exceed $150,000 annually. However, the Comptroller would be required to refund an assessment paid by a producer, plus interest, if the producer requests a refund within 3 months of the end of the fiscal year for which the assessment was levied, and provides the proper form and information to the Comptroller.
The bill as substituted would require the Comptroller to conduct a review of the programs administered by the council if, in any state fiscal year, 40 percent or more of the producers eligible to contribute to the fund requested a refund. The bill would require the Comptroller to report the findings to the Legislature with recommendations on whether the council and programs should continue without change, continue with recommended changes, or be discontinued and repealed.
The Council and the assessment would expire as of September 1, 2015.
Based on natural gas and crude oil data production data used in the Comptroller's 2006-07 Biennial Revenue Estimate, the assessment would collect approximately $1.60 million in fiscal year 2006, a partial collection year, and $3.88 million in fiscal year 2007, the first full year of collection. A 20 percent royalty rate was assumed. However, the bill as substituted allows for the refund of all collections for a fiscal year. For the purposes of this fiscal note, it is assumed that 100 percent of collections will be requested to be refunded each year.
However, the refunds would occur in the fiscal year after the year for which the assessment was paid. As a result, the $1.6 million collected in 2006, would be refunded in 2007, decreasing the net revenue in that fiscal year from $3.88 million to $2.29 million. Because the Comptroller projects that gross revenues at the wellhead will decline, estimated net revenue in 2008 would be negative as prior year refunds ($3.88 million) exceed 2008 collections ($3.75 million) by $130,000. This trend is projected to continue through 2010.
The bill as substituted would create an Energy Education Council that is required to employ an executive director and appropriate staff to implement the decisions and programs of the council, and pay administrative expenses from the energy education account, including the reimbursement of council member expenses.
Under the assumptions of this fiscal note, the assessment would not result in any new revenue to the energy education account that would not be refunded the following year. However, the energy education account also consists of gifts and grants, matching funds obtained through coordination of efforts with relevant federal programs, and appropriations of money to the account by the legislature. It is assumed that gifts and grants to the account, as well as federal matching funds, would be negligible. Therefore, it is assumed that the legislature would make appropriations it amounts necessary to implement the council's decisions and programs. To the extent that there are assessments that are not requested to be refunded, there will be resulting revenue to the account that would offset the amount of general revenue appropriations needed.
For the purposes of this fiscal note, it is assumed that the legislature would appropriate $1 million in General Revenue annually to the account to support the required activities of the Council. This estimate is based on an assumption that $1 million annually is the minimum amount that would both provide funds for the activities of the Council, as well as an adequate amount for the administration of those activities. The bill would limit administrative expenses to carry out the powers and duties of the Texas Energy Education Council to 15 percent of the annual account deposit; under the assumptions of this fiscal note, that would be a limit of approximately $150,000 a year. This amount would be sufficient to employ an executive director and one program manager, with associated salary, benefit and administrative costs, to manage the array of education, job training, and grant programs deemed necessary to fulfill the Council's duties as stipulated by the bill. It is assumed that the Council would spend the remaining available appropriations, estimated to be $850,000, on these programs.
No significant fiscal implications to the Railroad Commission or the Comptroller are expected.
Council staff may require some technology expenditures for routine agency accounting and grant management.
| Source Agencies: | 304 Comptroller of Public Accounts
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| LBB Staff: | JOB, SD, WK, UP, JGM
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