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High-Cost Natural Gas Tax Rate Incentive Study
Introduction
The Texas Legislature's General Appropriations Act for the 2014-151 biennium directed the Texas Comptroller of Public Accounts in a rider (No. 16 on Page I-23) to "conduct a study of the natural gas prices at which the high-cost gas rate reduction incentivizes natural gas production in Texas." According to Rider No. 16 the study should:
- Provide criteria for evaluating the effectiveness of the high-cost natural gas tax rate reduction program.
- Provide recommendations for increasing the effectiveness of the high-cost natural gas tax rate reduction program.
- Detail the range of natural gas prices at which the rate reduction incentivizes natural gas production.
- Consider the economic costs and benefits to the state of any increased production that is due to the rate reduction.
- Consider the degree to which oil and condensate production encourage natural gas extraction.
- Attempt to identify natural gas break-even prices in different shale plays throughout the state.
In January 2013, the Legislative Budget Board (LBB) presented to the Legislature its latest Texas State Government Effectiveness and Efficiency Report (GEER)2. In that GEER report's section beginning on page 73, the LBB made two recommendations to statutorily modify the high-cost natural gas tax rate reduction program. The first recommendation was to amend the Tax Code to revise the formula used to determine the natural gas tax rate applicable to a specific high-cost well; the second recommendation was to amend the Government Code provisions for the Comptroller's Tax Exemptions and Tax Incidence report. To date, the Legislature has not adopted those two recommendations.
The GEER report made a third recommendation, which the Legislature accepted, to include in the General Appropriations Act:
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a rider to require the Comptroller to conduct a study to determine at what natural gas prices, if any, the high-cost gas-rate reduction incentivizes production.
- 1 Senate Bill 1, Conference Committee Report, 83rd Legislature, Regular Session (2013).
- 2 The GEER report can be accessed at this URL: http://www.lbb.state.tx.us/Documents/Publications/GEER/Government%20Effectiveness%20and%20Efficiency%20Report%202012.pdf#ModifyTheHighCost.