HBA-SEP S.B. 344 77(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 344
By: Bivins
Ways & Means
5/7/2001
Engrossed


BACKGROUND AND PURPOSE 

Currently, state law requires the state to collect production taxes for
each barrel of oil and each Mcf (thousand cubic feet) of natural gas
produced in the state.  Senate Bill 344 implements a sliding scale for the
collection of crude oil and natural gas production taxes.   

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

Senate Bill 344 amends the Tax Code to require the comptroller of public
accounts (comptroller) to certify, each month, the average closing cost of
gas and of West Texas Intermediate crude oil, as recorded on the New York
Mercantile Exchange (NYMEX), for the previous three months and to publish
the certifications in the Texas Register.  The bill sets forth three rate
levels for the gas production tax based on a percentage of the market value
of gas produced and saved by the producer during that month and fixed to
the average closing price of gas certified by the comptroller for the
previous three month period.   The bill sets forth three rate levels for
the oil production tax that are fixed to the average closing price of West
Texas Intermediate crude oil certified by the comptroller for the previous
three month period and based on the greater of either a percent of the
specified market value of oil produced in this state during that month or
the price per barrel of oil produced in this state during that month.  If
the tax is paid at a higher rate than required, the person paying the tax
is entitled to a credit against taxes for the amount overpaid.  To receive
the credit, the person must apply to the comptroller not later than the
expiration of the applicable period for filing a tax refund.  The bill
modifies, from 2.3 percent of the market value of the oil to one-half
percent of the applicable rate, the rate of the oil production tax imposed
for oil produced in this state from a qualifying new or expanded enhanced
recovery project (SECTIONS 1.01 and 1.03).  As soon as practicable after
September 1, 2004, the comptroller is required to perform the initial
required certification determination (SECTION 1.05). 

A person paying tax during the period beginning on September 1, 2001, and
ending on August 31, 2004, is entitled to a credit against taxes imposed in
an amount equal to the difference between the amount of taxes paid under
existing provisions and the amount of taxes the person would have paid
under these provisions as the provisions exist on September 1, 2004.  To
receive the credit, the person must apply to the comptroller on or after
September 1, 2004, and not later than the expiration of the applicable
period for filing a tax refund (SECTIONS 1.02 and 1.04).  Beginning
September 1, 2001, the comptroller is required to monitor market prices to
determine the validity of any credit applications submitted under
provisions regarding gas production taxes (SECTION 1.05). 

EFFECTIVE DATE

Provisions requiring the comptroller to monitor market prices and to
perform the initial required certification determination take effect
September 1, 2001.  SECTIONS 1.01 through 1.04 take effect September 1,
2004.  The changes made to SECTIONS 1.01 and 1.03 are removed effective
September 1, 2006.