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Ways and Means to Hear Oil and Gas Undervaluation Issue

By Aurora Flores
TAC Legislative Staff

HB 889 by Rep. Tryon Lewis (R-Odessa), the oil and gas undervaluation bill, will be heard in the House Committee on Ways & Means on Monday, April 18.

Lewis and Sen. Carlos Uresti (D-San Antonio) both filed legislation to correct the inherent undervaluation and utilize market-based methodology to value crude oil and natural gas for property tax purposes. Uresti’s SB 1505 was heard in Senate Finance on April 4 where it received favorable support. The bill should soon be voted out of committee.

The revenue estimating methodology added to the statute in 2007 has been removed in the proposed bill language. The legislation uses prices published in the US Energy Information Administration’s (EIA) “Annual Energy Outlook” to determine the “price adjustment” for the first year.

This “price adjustment” will be calculated by the chief appraiser, using the forecasted price for the current calendar year and dividing by the estimated price for oil for the previous calendar year. The escalation rate for future years is based on the Producer Price Index (PPI) and the number of years that the prices can be escalated is capped at an additional five years. The comptroller’s role has been limited to publishing rules for calculating the escalation rate using PPI.

While HB 889/CSSB 1505 do not meet all of the counties’ concerns, the legislation is a definite improvement over the present statute. The proposed legislation should produce more accurate oil and gas appraisals than the current methodology, producing better results for counties over time.

For those officials interested in attending the Monday, April 18 hearing, House Ways & Means will meet at 2 p.m. or upon adjournment of the House in Capitol Extension room E2.014. For more information, please contact Aurora Flores at or (800) 456-5974.