III. Taxing Coal: Promoting Energy Efficiency and Raising Revenues
Introduction: Energy Extraction and Taxes in Texas
While producers of oil and natural gas in Texas are required to pay significant fees and taxes to the state, most other natural resource extraction industries pay only minimal fees and taxes (see Table 6). One way Texas could generate new revenues would be to increase fees and taxes on coal mining, uranium mining, and timber felling. Among these three industries, coal production would provide the largest source of additional revenues. (The burning of coal is a major contributor to the state's air pollution problems. Increasing fees and taxes on its production would help make polluting industries in Texas pay for their part in contributing to the state's air quality woes.)
Natural gas producers in Texas pay 7.5 percent of the market value of gas produced in the state. This tax raised $628 million in FY 2002. While this amount is significantly less than the amount raised in FY 1985, when more than $1.2 billion was raised from the natural gas production tax, it still represents 2.4 percent of the state’s tax collections and 1.1 percent of all revenues collected. Oil producers in state pay 4.6 percent of the market value of the oil they produce, or 4.6 cents on every 42 standard barrel of oil, whichever is more. In FY 2002, this tax raised more than $338 million, or 1.3 percent of the taxes collected and 0.6 percent of total revenues. Taken together, these two “severance” taxes raised nearly $1 billion dollars for the state even at a time when gas and oil prices were relatively low. 9
Oil and natural gas producers also pay regulatory fees and taxes. Oil producers must pay an oilfield cleanup fee, which was recently doubled from 5/16 to 5/8 of 1 cent on each barrel of 42 standard gallons produced. Oil producers also must pay a regulatory tax of 3/16th of 1 cent per standard barrel. Natural gas producers pay an oilfield clean-up fee, recently doubled from 1/30th of 1 cent to 1/15th of 1 cent for each 1,000 cubic feet of natural gas. To help clean up oil spills and leaking underground storage tanks, additional fees are imposed upon transfer of crude oil to or from marine vessels and upon the import or withdrawal of petroleum products from bulk storage facilities.