Texas House Bill HB3275

Texas 2019 - 86th Regular

Caption

Relating to the repeal of the exemption from the severance tax for flared or vented gas.

Impact

The implementation of HB3275 would have far-reaching implications for gas producers in Texas. By applying the severance tax to flared gas, the legislation aims to promote more responsible extraction practices, potentially reducing environmental hazards associated with gas flaring. This could also lead to increased state revenue, funds that might be redirected toward infrastructure and community services. There is a recognition that this change may promote better resource management and encourage companies to find alternatives to flaring, such as capturing and utilizing the gas instead.

Summary

House Bill 3275 seeks to repeal the exemption from the severance tax for flared or vented gas in Texas. This legislative change would mean that gas which is currently flared or vented—practices often employed in oil and gas extraction—would be subject to a severance tax at a rate of 7.5 percent of its market value. The bill specifically amends several sections of the Tax Code to align with this change, eliminating the current loophole that allows certain gas production activities to avoid taxation. This is particularly relevant given Texas's significant role in national energy production and environmental considerations regarding gas flaring activities.

Contention

While the bill aims to address important regulatory and economic issues, it is likely that the repeal of the exemption will face opposition from certain industry stakeholders. Critics may argue that imposing a tax on flared gas could undermine profit margins for smaller operators, who might already be struggling with production costs. Furthermore, concerns about the economic consequences for gas extraction practices and the potential for increased compliance burdens might spark significant debate among lawmakers and businesses. Hence, the overall passage of HB3275 will likely require a balancing act between environmental accountability and industry viability.