FISCAL NOTE
Date Requested: February 13, 2017
Time Requested: 01:43 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1186 |
Introduced |
|
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, Natural Gas & Oil Division of Highways Reallocated Severance Tax Fund, Natural Gas & Oil County Reallocated Severance Tax Fund
Sources of Revenue:
General Fund,Special Fund
Legislation creates:
A New Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to reallocate and dedicate the natural gas and oil severance tax revenues, up to $30 million annually, to the natural gas and oil producing counties of origin. The bill provides for distribution of the moneys to the districts of the Division of Highways by the State Treasurer. The bill establishes amounts each natural gas and oil-producing county in a district is to receive. The bill requires moneys to be used solely for the secondary roads. The bill provides duties of State Tax Commissioner. The bill requires reports of expenditures to Joint Committee on Government and Finance. The bill provides audits of distributed funds when authorized by the Joint Committee on Government and Finance. The bill provides an effective date. The bill authorizes legislative and emergency rules.
According to our interpretation, passage of this bill would result in the annual allocation of $30 million of State General Revenue Fund collections to the State Division of Highways for use in road maintenance in counties with oil and gas production other than coal-bed methane production first effective in FY2018. The bill provides that such revenue transfers would occur quarterly to the Natural Gas and Oil Division of Highways Reallocated Severance Tax Fund on the basis of each county’s relative share of natural gas production and each county’s relative share of oil production.
The current 10 percent oil and natural gas revenue sharing program with local governments is based on annual production data collected by the Department of Environmental Protection (DEP) from more than 50,000 wells and finalized more than seven months following the conclusion of a calendar year. The Tax Department distribution to local governments occurs once a year around October 1 for activity of the prior calendar year based on each county’s share of total production for oil and each county’s share of total production of natural gas as determined by DEP. If the provisions of this bill contemplate an accurate accounting of oil and natural gas production on a current quarterly basis, the proper administration of this new additional general revenue reallocation program would require new quarterly production reports from the more than 50,000 producing wells at significant cost to both the industry and either the State Tax Department or Department of Environmental Protection.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2018. There would be no additional costs in fiscal years thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
5,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
5,000 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would result in the annual allocation of $30 million of State General Revenue Fund collections to the State Division of Highways for use in road maintenance in counties with oil and gas production other than coal-bed methane production first effective in FY2018. The bill provides that such revenue transfers would occur quarterly to the Natural Gas and Oil Division of Highways Reallocated Severance Tax Fund on the basis of each county’s relative share of natural gas production and each county’s relative share of oil production.
The current 10 percent oil and natural gas revenue sharing program with local governments is based on annual production data collected by the Department of Environmental Protection (DEP) from more than 50,000 wells and finalized more than seven months following the conclusion of a calendar year. The Tax Department distribution to local governments occurs once a year around October 1 for activity of the prior calendar year based on each county’s share of total production for oil and each county’s share of total production of natural gas as determined by DEP. If the provisions of this bill contemplate an accurate accounting of oil and natural gas production on a current quarterly basis, the proper administration of this new additional general revenue reallocation program would require new quarterly production reports from the more than 50,000 producing wells at significant cost to both the industry and either the State Tax Department or Department of Environmental Protection.
Even though 45 or more county road systems might benefit from reallocated general revenue, the distribution of the proposed reallocated general revenue fund collections would be highly concentrated in just a few counties. In FY2016, the top 5 producing counties accounted for 72 percent of total production, up from 19 percent seven years ago. These five counties received $5.5 million in FY2016 associated with the current severance tax revenue sharing program in addition to the benefit of significantly higher local property tax revenues associated with their expanding natural gas industry. Under the proposed program, the top five counties would be allocated roughly $21 million out of a total of $30 million and the 15 lowest producing counties would collectively receive roughly 200,000. In most of these lower producing counties, the administrative costs for the Division of Highways related to the new program may largely absorb the amount of reallocated general revenue.
Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2018. There would be no additional costs in fiscal years thereafter.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov