FISCAL NOTE
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to reduce the severance rate on natural gas from five percent to three percent for wells drilled on or after December 1, 2005; to remove the five-year severance tax exemption for coalbed methane wells drilled on or after December 1, 2005; and to reduce the severance tax rate on coalbed methane to three percent.
According to our interpretation and based upon available data, passage of this bill would result in a net gain to the General Revenue Fund of approximately $150,000 in 2006 and net losses to the General Revenue Fund of roughly $1.2 million in 2007 and $2.6 million in 2008. The annual net loss to the General Revenue Fund will continue to increase over time as a greater proportion of production becomes taxable under the 3 percent rate. At current levels of prices and production, the annual net loss to the General Revenue Fund will ultimately exceed $15.0 million.
In addition to the net loss to the General Revenue Fund, passage of this bill would adversely affect distributions to local governments. The net loss to local governments would be approximately $15,000 in 2006, $200,000 in 2007, and $400,000 in 2008. The annual net loss to local governments will continue to increase over time as a greater proportion of production becomes taxable under the 3 percent rate. At current levels of prices and production, the annual net loss to local governments will ultimately exceed $1.8 million.
Additional administrative costs to the State Tax Department associated with this bill would be minimal.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2005
Increase/Decrease
(use"-") |
2006
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
4,000 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
4,000 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Memorandum
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