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.