LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 87TH LEGISLATIVE REGULAR SESSION April 29, 2021 TO: Honorable Craig Goldman, Chair, House Committee on Energy Resources FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB4442 by Raymond (Relating to the regulation of oil and gas waste; imposing a fee.), Committee Report 1st House, Substituted Estimated Two-year Net Impact to General Revenue Related Funds for HB4442, Committee Report 1st House, Substituted : an impact of $0 through the biennium ending August 31, 2023.However, the bill would have a positive impact of $9,180,122 to General Revenue-Dedicated Oil and Gas Regulation and Cleanup Account No. 5155 in the 2022-23 biennium. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. General Revenue-Related Funds, Five- Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact toGeneral Revenue Related Funds2022$02023$02024$02025$02026$0All Funds, Five-Year Impact: Fiscal Year Probable (Cost) fromOil & Gas Regulation5155 Probable Revenue Gain fromOil & Gas Regulation51552022($141,565)$4,400,0002023($28,313)$4,950,0002024($21,235)$5,400,0002025$0$5,700,0002026$0$5,950,000 Fiscal AnalysisThe bill would amend the Natural Resources Code to create a $200 nonrefundable fee for oil and gas well drilling permits that utilize a reserve pit for the disposal of oil field waste. The bill would add solids control equipment and closed-loop drilling systems to waste minimization incentives and allow funds deposited to Oil and Gas Regulation and Cleanup Account No. 5155 (OGRC Fund 5155) to be used for the remediation of a site that utilized a reserve pit or an above ground tank.The bill would require oil and gas well operators to record the volume and type of waste generated at a well site and the primary method of disposal. It would also require an operator to provide a written notice to landowners if an on-site reserve pit is utilized on the property.The provisions of the bill would only apply to an application or materially amended application submitted after the effective date of the bill, or September 1, 2021.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 87TH LEGISLATIVE REGULAR SESSION
April 29, 2021
TO: Honorable Craig Goldman, Chair, House Committee on Energy Resources FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HB4442 by Raymond (Relating to the regulation of oil and gas waste; imposing a fee.), Committee Report 1st House, Substituted
TO: Honorable Craig Goldman, Chair, House Committee on Energy Resources
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: HB4442 by Raymond (Relating to the regulation of oil and gas waste; imposing a fee.), Committee Report 1st House, Substituted
Honorable Craig Goldman, Chair, House Committee on Energy Resources
Honorable Craig Goldman, Chair, House Committee on Energy Resources
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
HB4442 by Raymond (Relating to the regulation of oil and gas waste; imposing a fee.), Committee Report 1st House, Substituted
HB4442 by Raymond (Relating to the regulation of oil and gas waste; imposing a fee.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB4442, Committee Report 1st House, Substituted : an impact of $0 through the biennium ending August 31, 2023.However, the bill would have a positive impact of $9,180,122 to General Revenue-Dedicated Oil and Gas Regulation and Cleanup Account No. 5155 in the 2022-23 biennium. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Estimated Two-year Net Impact to General Revenue Related Funds for HB4442, Committee Report 1st House, Substituted : an impact of $0 through the biennium ending August 31, 2023.However, the bill would have a positive impact of $9,180,122 to General Revenue-Dedicated Oil and Gas Regulation and Cleanup Account No. 5155 in the 2022-23 biennium. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
However, the bill would have a positive impact of $9,180,122 to General Revenue-Dedicated Oil and Gas Regulation and Cleanup Account No. 5155 in the 2022-23 biennium.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
General Revenue-Related Funds, Five- Year Impact:
2022 $0
2023 $0
2024 $0
2025 $0
2026 $0
All Funds, Five-Year Impact:
2022 ($141,565) $4,400,000
2023 ($28,313) $4,950,000
2024 ($21,235) $5,400,000
2025 $0 $5,700,000
2026 $0 $5,950,000
Fiscal Analysis
The bill would amend the Natural Resources Code to create a $200 nonrefundable fee for oil and gas well drilling permits that utilize a reserve pit for the disposal of oil field waste. The bill would add solids control equipment and closed-loop drilling systems to waste minimization incentives and allow funds deposited to Oil and Gas Regulation and Cleanup Account No. 5155 (OGRC Fund 5155) to be used for the remediation of a site that utilized a reserve pit or an above ground tank.The bill would require oil and gas well operators to record the volume and type of waste generated at a well site and the primary method of disposal. It would also require an operator to provide a written notice to landowners if an on-site reserve pit is utilized on the property.The provisions of the bill would only apply to an application or materially amended application submitted after the effective date of the bill, or September 1, 2021.
The bill would add solids control equipment and closed-loop drilling systems to waste minimization incentives and allow funds deposited to Oil and Gas Regulation and Cleanup Account No. 5155 (OGRC Fund 5155) to be used for the remediation of a site that utilized a reserve pit or an above ground tank.The bill would require oil and gas well operators to record the volume and type of waste generated at a well site and the primary method of disposal. It would also require an operator to provide a written notice to landowners if an on-site reserve pit is utilized on the property.The provisions of the bill would only apply to an application or materially amended application submitted after the effective date of the bill, or September 1, 2021.
Methodology
According to the Comptroller of Public Accounts (CPA), approximately 10,300 drilling permits will be submitted to the Railroad Commission (RRC) in fiscal year 2022 and 11,600 in fiscal year 2023. This analysis assumes that approximately 85.0 percent of drilling permits would pay a reserve pit fee of $500 ($200 reserve pit fee + $300 surcharge, see below) and generate an estimated $4,400,000 in additional revenue in fiscal year 2022 and $4,950,000 in fiscal year 2023. The additional fee revenue would be credited to OGRC Fund 5155. Natural Resources Code 81.070 allows RRC to impose a reasonable surcharge, not to exceed 185.0 percent, on fees that are deposited to OGRC Fund 5155 to recover costs associated with the purposes of the fund. According to RRC, a surcharge of $300, or 150.0 percent, would be applied to the new reserve pit fee which is consistent with existing surcharges placed on drilling permit fees.Based on information provided by the RRC, this analysis assumes the agency's online drilling permit system and LoneSTAR system would require modifications to add the new reserve pit fee to the drilling permit application process and to allow inspectors to verify that an operator utilizing a reserve pit has paid the required fee. The modification would require $141,565 in fiscal year 2022; $28,313 in fiscal year 2023; and $21,235 in fiscal year 2024 from OGRC Fund 5155.This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.The bill would take effect September 1, 2021.
Based on information provided by the RRC, this analysis assumes the agency's online drilling permit system and LoneSTAR system would require modifications to add the new reserve pit fee to the drilling permit application process and to allow inspectors to verify that an operator utilizing a reserve pit has paid the required fee. The modification would require $141,565 in fiscal year 2022; $28,313 in fiscal year 2023; and $21,235 in fiscal year 2024 from OGRC Fund 5155.
This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
This legislation would do one or more of the following: create or recreate a dedicated account in the General Revenue Fund, create or recreate a special or trust fund either with or outside of the Treasury, or create a dedicated revenue source. The fund, account, or revenue dedication included in this bill would be subject to funds consolidation review by the current Legislature.
The bill would take effect September 1, 2021.
Technology
The RRC's online drilling permit system and LoneSTAR system would require modifications that would cost $141,565 in fiscal year 2022; $28,313 in fiscal year 2023; and $21,235 in fiscal year 2024 from OGRC Fund 5155.
Local Government Impact
No significant fiscal implication to units of local government is anticipated.
Source Agencies: b > td > 304 Comptroller of Public Accounts, 455 Railroad Commission
304 Comptroller of Public Accounts, 455 Railroad Commission
LBB Staff: b > td > JMc, AJL, MW, DA
JMc, AJL, MW, DA