FISCAL NOTE
Date Requested: January 17, 2019
Time Requested: 02:21 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1328 |
Introduced |
HB2489 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, OIl & Gas Counties Revenue Fund, All Counties and Municipalities Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Creates New Expense
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to remove the severance tax on oil & gas produced from low producing wells.
According to our interpretation, passage of this bill would exclude natural gas production from wells producing between 5,000 cubic feet and 15,000 cubic feet per day and oil wells that produce between one-half barrel and 2.5 barrels per day from the 5 percent Severance Tax at an initial annual cost of roughly $6 million to State and local governments. Given that the provisions of this bill would take effect on January 1, 2019, General Revenue Fund collections would decrease by up to $1.2 million in in FY2019, by up to $6 million in FY2020 and by up to $5.4 million per year, thereafter at current price levels. Local governments would collectively lose up to $0.6 million per year beginning in FY2021.
In addition to current exclusions for very low volume wells, the provisions of this bill would exclude roughly 3.3 percent of current natural gas production and 5.7 percent of current oil production from tax. The provisions of the bill would generally exempt many traditional vertical stripper wells from severance tax. Some horizontal wells would also benefit, including a few wells with a volume of natural gas production that is too large for exclusion, but a smaller volume of oil production that might fall under the exclusion limits. Over time, the share of total natural gas production excluded from severance taxation should slowly decline as overall production from shale wells increases.
Additional administrative costs to the Tax Department would be $10,000 a year beginning in FY2020.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2019
Increase/Decrease
(use"-") |
2020
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
10,000 |
10,000 |
| Personal Services |
0 |
10,000 |
10,000 |
| Current Expenses |
0 |
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):
According to our interpretation, passage of this bill would exclude natural gas production from wells producing between 5,000 cubic feet and 15,000 cubic feet per day and oil wells that produce between one-half barrel and 2.5 barrels per day from the 5 percent Severance Tax at an initial annual cost of roughly $6 million to State and local governments. Given that the provisions of this bill would take effect on January 1, 2019, General Revenue Fund collections would decrease by up to $1.2 million in in FY2019, by up to $6 million in FY2020 and by up to $5.4 million per year, thereafter at current price levels. Local governments would collectively lose up to $0.6 million per year beginning in FY2021.
In addition to current exclusions for very low volume wells, the provisions of this bill would exclude roughly 3.3 percent of current natural gas production and 5.7 percent of current oil production from tax. The provisions of the bill would generally exempt many traditional vertical stripper wells from severance tax. Some horizontal wells would also benefit, including a few wells with a volume of natural gas production that is too large for exclusion, but a smaller volume of oil production that might fall under the exclusion limits. Over time, the share of total natural gas production excluded from severance taxation should slowly decline as overall production from shale wells increases.
Additional administrative costs to the Tax Department would be $10,000 a year beginning in FY2020.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov