Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources & Economic Development
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
SB533 by Birdwell (Relating to the severance tax exemption for oil and gas produced from certain inactive wells.), As Introduced
No significant fiscal implication to the State is anticipated.
The bill would amend Section 202.056 of the Tax Code to make permanent the two-year inactive well exemptions for oil and natural gas production taxes by removing the deadlines for the application submission and the designation of the wells by the Railroad Commission (RRC). The bill would narrow the definition of a qualifying two-year inactive well to exclude: 1) a well which has been drilled but not completed, and without a record of hydrocarbon production as reported to the RRC; and 2) a well that is part of an enhanced oil recovery project. The exemption period would be reduced from 10 to 5 years.
The bill would repeal the definition of a three-year inactive well and remove from this section references to the expired three-year inactive well exemptions for oil and natural gas production taxes, which were last certified by the RRC in 1996.
The bill would provide an incentive to return marginal inactive wells to production. Although it is possible that certain non-marginal wells would qualify for this exemption, production is expected to be inconsequential and there would be no significant state revenue impact.
The bill would take effect September 1, 2019.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.