Tax incentive for tertiary production.

03LSO-0237.L1

FISCAL NOTE (HB0054)

The fiscal impact is indeterminable.

Source of potential revenue decrease:

Decrease in severance taxes on oil produced from tertiary projects that qualify for 2 percent exemption.

The fiscal impact of reinstating the tertiary production incentive will be based on future events, including the planned future installation of a CO2 pipeline in the Powder River Basin. Assuming this new pipeline is installed, and assuming future qualifying tertiary projects come into existence, reinstatement of the tertiary production incentive could result in a severance tax decrease up to an estimated $2.8 million per year. Due to the uncertainty of the existence and the timing of these future events, the fiscal impact of this potential revenue decrease indeterminable.

Source of potential revenue increase:

Severance taxes on increased oil production from new tertiary projects.

The fiscal impact of reinstating the tertiary production incentive will be based on future events, including the planned future installation of a CO2 pipeline in the Powder River Basin. Assuming this new pipeline is installed, and assuming future qualifying tertiary projects come into existence, reinstatement of the tertiary production incentive could result in a severance tax increase from increased oil production from new tertiary projects. Due to the uncertainty of the existence and the timing of these future events, the fiscal impact of this potential revenue increase is indeterminable.

Prepared by:   Dean Temte, LSO    Phone:   777-7881

(information provided by Randy Bolles/Rick Meese, Dept. of Revenue; phone 777-5237: Don Likwartz, Oil & Gas Comm.; phone (307)234-7147)