Texas’ severance tax on oil and gas would be set on a sliding scale to assist industry during less profitable times, under a bill passed this week in the Texas Senate. Sen. Teel Bivins (R-Amarillo) said the legislation (SB 344) would create a sliding tax scale to allow industry to pay as little as 1% in taxes.

Under Bivins’ plan, natural gas taxes would fall to 5% if the price of gas fell between $1.25/Mcf and $3/Mcf. It would drop to 2% if the price fell below $1.25. Currently, the state levies a $7.5% tax on natural gas. If the price of oil falls below $12/bbl, industry would only pay a 1% tax under the Bivins plan. Currently, Texas levies a 4.6% severance tax on crude oil. The severance tax for oil under the proposal would be 4.6% when the price is more than $20/bbl, and would drop to 2.3% if oil fell to more than $12/bbl but less than $20/bbl.

“Lawmakers shouldn’t wait for prices to hit rock bottom again before we act,” said Bivins. “It’s my belief that we should fix the roof while the sun is still shining.”

In 1999, the Texas Legislature approved emergency legislation resulting in $45 million in tax relief for the state’s energy industry, and Bivins said it showed that the lawmakers were willing to provide protection. The relief package (SB 290) came when the price of oil fell below $15 a barrel for three consecutive months. Bivins’ legislation now will be taken up by the Texas House.

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