Brief ⁽¹⁾

HB 2721, as amended, would make two changes in the severance tax exemption enacted in 1998 for certain incremental production resulting from production enhancement projects.

One provision would specify that the "monthly rate of production decline" used in the determination of "base production" would be equal to zero when a well or project has experienced no monthly decline during the 12-month period immediately prior to the commencement of the production enhancement project. Current law provides that the monthly rate of production decline is equal to the average extrapolated monthly decline rate for the well or project during that 12-month period.

A second provision would declare that "base production" would be equal to zero for wells or projects which may have produced during the preceding 12 months but which are not capable of production on the commencement date.

Background

The latest fiscal note from the Department of Revenue indicates that if repair of casing leaks is to be considered an "enhancement project," the bill could reduce FY 2001 severance tax receipts by $0.75 million.

The House Committee amendment is technical.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html