LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION April 13, 2025 TO: Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1150 by Middleton (relating to the plugging of and reporting on inactive wells subject to the jurisdiction of the Railroad Commission of Texas; authorizing an administrative penalty), Committee Report 1st House, Substituted Estimated Two-year Net Impact to General Revenue Related Funds for SB1150, Committee Report 1st House, Substituted: an impact of $0 through the biennium ending August 31, 2027. 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 Funds2026$02027$02028$02029$02030$0All Funds, Five-Year Impact: Fiscal Year Probable (Cost) fromOil & Gas Regulation5155 Change in Number of State Employees from FY 20252026($13,527,923)54.02027($12,228,700)77.02028($12,063,718)86.02029($11,625,358)86.02030($11,186,998)86.0 Fiscal AnalysisThe bill would amend the Natural Resources Code to restrict the number of years a well can be inactive and adds additional requirements for both operators and Railroad Commission (RRC). The bill would allow inactive well operators to file an individual performance bond in an amount not less than the full cost calculation for plugging an inactive well (as established by the RRC) to gain an extension of the deadline for plugging an inactive well. The bill would also create the Inactive Well Annual Report, would require the RRC to administratively review and approve requests to transfer inactive wells from one operator to another, and would require the RRC to adopt rules to implement the provisions of the bill. The bill would require the RRC to establish an administrative penalty for violations of the bill. The bill would require the RRC to prepare and submit a report to the Governor, Lieutenant Governor, and each member of the Legislature on or before September 1, 2026, and each subsequent year information required by the bill.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION
April 13, 2025
TO: Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: SB1150 by Middleton (relating to the plugging of and reporting on inactive wells subject to the jurisdiction of the Railroad Commission of Texas; authorizing an administrative penalty), Committee Report 1st House, Substituted
TO: Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: SB1150 by Middleton (relating to the plugging of and reporting on inactive wells subject to the jurisdiction of the Railroad Commission of Texas; authorizing an administrative penalty), Committee Report 1st House, Substituted
Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources
Honorable Brian Birdwell, Chair, Senate Committee on Natural Resources
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
SB1150 by Middleton (relating to the plugging of and reporting on inactive wells subject to the jurisdiction of the Railroad Commission of Texas; authorizing an administrative penalty), Committee Report 1st House, Substituted
SB1150 by Middleton (relating to the plugging of and reporting on inactive wells subject to the jurisdiction of the Railroad Commission of Texas; authorizing an administrative penalty), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for SB1150, Committee Report 1st House, Substituted: an impact of $0 through the biennium ending August 31, 2027. 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 SB1150, Committee Report 1st House, Substituted: an impact of $0 through the biennium ending August 31, 2027. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
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:
2026 $0
2027 $0
2028 $0
2029 $0
2030 $0
All Funds, Five-Year Impact:
2026 ($13,527,923) 54.0
2027 ($12,228,700) 77.0
2028 ($12,063,718) 86.0
2029 ($11,625,358) 86.0
2030 ($11,186,998) 86.0
Fiscal Analysis
The bill would amend the Natural Resources Code to restrict the number of years a well can be inactive and adds additional requirements for both operators and Railroad Commission (RRC). The bill would allow inactive well operators to file an individual performance bond in an amount not less than the full cost calculation for plugging an inactive well (as established by the RRC) to gain an extension of the deadline for plugging an inactive well. The bill would also create the Inactive Well Annual Report, would require the RRC to administratively review and approve requests to transfer inactive wells from one operator to another, and would require the RRC to adopt rules to implement the provisions of the bill. The bill would require the RRC to establish an administrative penalty for violations of the bill. The bill would require the RRC to prepare and submit a report to the Governor, Lieutenant Governor, and each member of the Legislature on or before September 1, 2026, and each subsequent year information required by the bill.
Methodology
Based on the analysis of the RRC, implementing the provisions of the bill would require well site inspections of inactive wells to gather data and determine the risk to the health and safety of the public and the environment. The agency assumes it would develop a system to prioritize inspections and would also require: (1) modifying the Producer's Transportation Authority and Certificate of Compliance (P-4) and the Oil Field Cleanup (OFCU) legacy systems to move the system to a newer platform; (2) modifying the Oil and Gas disposal/injection testing and injection well testing processes (H-5 and H-15) systems; and (3) modifying and upgrading the agency's well plugging (W-3A, W-3 and W-3X) and Surface Equipment Removal for an Inactive Well (W-3C) systems.For the purposes of this analysis, the table above assumes General Revenue-Dedicated Oil and Gas Regulation and Cleanup Account No. 5155 (GR-D 5155) would be used to cover the cost of implementing the provisions of the bill. If revenue collections and the GR-D 5155 fund balance should become insufficient to pay for all costs, this analysis assumes that General Revenue Funds would be used instead. Based on information provided by the RRC, this analysis assumes revenues would not be generated apart from any penalty revenues that may be assessed and collected from implementing the provisions of the bill.Based on the information provided by RRC, it is assumed that 54 new positions would be required in fiscal year 2026, increasing to 77 in fiscal year 2027 and 86 in fiscal year 2028 and each fiscal year after. Salary costs would include $3,779,651 in fiscal year 2026, $5,573,353 in fiscal year 2027, $6,353,032 in fiscal year 2028 and continuing in each year after. These FTEs would be required to create a new team dedicated to inactive well compliance and for field inspectors to assist with the review of Inactive Well Compliance Plans. They will also be required to inspect inactive wells to determine potential well-plugging costs to determine individual performance bonds. According to the agency, forty Engineer Specialist III positions would be required as inspectors to determine any potential health and safety hazards to the public or environmental risks posed by inactive wells, and to determine well specific factors like wellhead/wellbore integrity, pressure, and fluid levels, and regional considerations like penetration of corrosion, presence of hydrogen sulfide gas, and formation pressure. 5.0 Compliance Analysts and one support staff are required for the individual performance bond determinations. Costs reflected in the table above also include $1,074,177 for employee benefits costs in fiscal year 2026, $1,583,947 in fiscal year 2027, $1,805,532 in fiscal year 2028 and each year after; $56,695 for payroll contributions in fiscal year 2026, $83,600 in fiscal year 2027, $95,295 in fiscal year 2028 and each year after; $810,000 for standard operating expenses in fiscal year 2026, $1,155,000 in fiscal year 2027, $1,290,000 in fiscal year 2028 and each year after; and $2,873,000 in fiscal year 2026 for new equipment. Costs reflected also include $2,467,200 in fiscal year 2026, $4,934,400 in fiscal year 2026, $3,832,800 in fiscal year 2027, $2,519,859 in fiscal year 2028, $2,081,499 in fiscal year 2029, and $1,643,139 in fiscal year 2030 for software development costs. Based on information provided by the Comptroller of Public Accounts, the revenue impact from new administrative penalties cannot be determined because the number of violations that would occur, the number of penalties that would be assessed, and the associated penalty revenue that would be collected is unknown.
Based on information provided by the Comptroller of Public Accounts, the revenue impact from new administrative penalties cannot be determined because the number of violations that would occur, the number of penalties that would be assessed, and the associated penalty revenue that would be collected is unknown.
Based on information provided by the Comptroller of Public Accounts, the revenue impact from new administrative penalties cannot be determined because the number of violations that would occur, the number of penalties that would be assessed, and the associated penalty revenue that would be collected is unknown.
Based on information provided by the Comptroller of Public Accounts, the revenue impact from new administrative penalties cannot be determined because the number of violations that would occur, the number of penalties that would be assessed, and the associated penalty revenue that would be collected is unknown.
Technology
Based on the information provided by RRC, technology costs related to updating multiple systems and developing additional data integrations and workflows for inactive well analysis and reporting would include $4,934,400 in fiscal year 2026, $3,832,800 in fiscal year 2027, $2,519,859 in fiscal year 2028, $2,081,499 in fiscal year 2029, and $1,643,139 in fiscal year 2030.
Local Government Impact
No 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, TUf, MW, JOc
JMc, TUf, MW, JOc