Marginal well tax relief appears to lack support of Texas

AUSTIN, Texas -- After zooming through the Senate like greased lightning, a measure offering up to $45 million in severance tax relief for owners of marginal oil and gas wells has bogged down in the House.

The bill, which is the only "emergency" measure declared by Gov. George W. Bush for this session, got stuck Wednesday in the Republican-dominated House Ways and Means Committee.

The committee set a vote for March 3. But Chairman Rene Oliveira, D-Brownsville, said he is "absolutely convinced" that the measure, Senate Bill 290, lacks the 100 House votes necessary for immediate impact. Bush's fervent backing of the bill has not instilled a sense of urgency in Democrats on the committee. But even Republicans were moving cautiously, citing questions about the wisdom of this particular tax break. The debate that largely focused on the need for relief for the struggling oil and gas industry, veered into big-picture questions about taxation of oil and gas production. This is a sharp contrast to the Senate, which quickly and overwhelmingly approved the bill earlier this month. This measure calls for an immediate severance tax exemption designed to keep producers from shutting oil and gas wells producing only a little oil each day. Backers say this will encourage owners to keep these wells in production while oil prices are depressed. Otherwise they are likely to permanently shut in these money-losing wells, which would cost the industry jobs and reduce school tax collections from mineral-producing land. The Senate measure, approved 25-1, would exempt from the 4.6 percent severance tax those wells that produce less than 15 barrels a day if the monthly average closing price of West Texas Intermediate crude is below $15 per barrel. Some House members said they wanted to take a conservative approach to any relief, especially considering projections by state revenue estimators that oil prices could rebound by as much as 25 percent by later this year. The April futures benchmark crude contract traded on the New York Mercantile Exchange rose 7 cents to $12.68 a barrel in trading Thursday.

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