[Congressional Record Volume 145, Number 108 (Wednesday, July 28, 1999)]
[Extensions of Remarks]
[Pages E1675-E1679]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


           RELIEF FROM INTEREST AND PENALTIES ON FERC REFUNDS

                                 ______
                                 

                           HON. DENNIS MOORE

                               of kansas

                    in the house of representatives

                         Tuesday, July 27, 1999

  Mr. MOORE. Mr. Speaker, on July 29, the House Commerce Subcommittee 
on Energy and Power has scheduled a hearing on H.R. 1117, legislation 
introduced by my colleague from Kansas, Jerry Moran, and cosponsored by 
the entire Kansas House delegation.
  This legislation would provide relief from unfair interest and 
penalties on refunds retroactively ordered by the Federal Energy 
Regulatory Commission. For two decades, FERC allowed gas producers to 
obtain reimbursement for payment of the Kansas ad valorem tax on 
natural gas. In a series of orders, FERC repeatedly reaffirmed the 
rights of gas producers to collect the ad valorem tax, rebuking various 
challenges to this practice. In 1993, however, FERC reversed 19 years 
of precedent and ruled that the ad valorem tax had not been eligible 
for reimbursement. FERC has since ordered all producers operating 
during a 5-year period in the 1980's to refund both principal and 
interest associated with reimbursement of the ad valorem tax.
  With this legislation hopefully headed toward consideration by the 
full House of Representatives. I am taking this opportunity to place in 
the Record a letter recently sent by Kansas Senate Democratic Leader 
Anthony Hensley to House Commerce Committee Ranking Democrat John 
Dingell, concerning the legislative history of ad valorem and severance 
taxes in Kansas. This background will be very helpful to our colleagues 
as they review this issue in the weeks ahead.

                                                  State of Kansas,


                                  Office of Democratic Leader,

                                        Topeka, KS, June 18, 1999.
     Re: Kansas Ad Valorem Tax refund detrimental reliance on 
         federal law.

     Hon. John D. Dingell,
     House of Representatives, Committee on Commerce, Rayburn 
         House Office Building, Washington, DC.
       Dear Congressman Dingell: On June 8, 1999, the House Energy 
     and Power Subcommittee held a hearing on the Kansas Ad 
     Valorem Tax refund issue. This issue is extremely important 
     to the State of Kansas and one of our most important 
     industries, the production of oil and gas. As a 23-year 
     veteran of the Kansas Legislature and as the Minority Leader 
     of the Kansas Senate, I am writing to request your support of 
     Congressman Jerry Moran's legislation to alleviate what I 
     believe is a serious miscarriage of justice.
       I was a member of the Kansas Legislature in 1983 when 
     Governor John Carlin promoted and obtained passage of a 
     severance tax on oil and gas. Prior to 1983, Kansas did not 
     have a severance tax, only an ad valorem tax. At that time, 
     the ad valorem tax took approximately 3.1% of the value of 
     production and was revenue used by counties and local school 
     districts. Oklahoma and Texas, on the other hand, had 
     severance taxes in place for many years equal to 7.085% to 
     7.5% of the value of gas production. Wyoming had in place a 
     4% severance tax on oil and gas ``in addition to'' a 6.5% 
     property tax on oil and gas for a total tax burden of 10.5%. 
     Likewise, Colorado had a severance tax on gas ranging from 
     2%-5% ``in addition to'' a 5.4% property tax, for a total tax 
     burden of 7.4% to 10.4%.
       As you know, federal law allowed purchasers to add all of 
     these taxes on to the Federal Power Commission's (FPC) 
     maximum lawful price when purchasing gas. In Wyoming and 
     Colorado, both a severance tax and a property tax were 
     permitted to be added to the maximum lawful price. Texas had 
     both a severance tax and a property tax, however, because of 
     the way its property tax was structured, it was allowed to 
     add on only the 7.5% severance tax to the FPC maximum lawful 
     price. The Kansas Attorney General requested clarification 
     from the FPC to determine whether Kansas' ad valorem tax 
     could lawfully be added to the FPC maximum lawful price. In 
     1974, Opinion 699-D clarified this issue and did allow the 
     Kansas ad valorem tax as a lawful addition to the price.
       In 1981, the State of Kansas needed additional funding for 
     education, roads and infrastructure, and Governor Carlin 
     began studying the potential for a severance tax. One of our 
     state's most valuable natural resources was being depleted 
     and consumed out of state, pipelines were strewn across 
     Kansas, drilling equipment was taking its toll on Kansas 
     roads and infrastructure, and little benefit was being 
     derived by Kansas government. The price of gas at the 
     wellhead, sold in interstate commerce, was being controlled 
     by the federal government at prices far below fair market 
     value, resulting in the transfer of enormous wealth from 
     Kansas to out of state consumers. Texas, Oklahoma, Colorado, 
     Wyoming and other states were collecting taxes on oil and gas 
     at over twice the Kansas tax rate.
       Governor Carlin proposed a severance tax which, when added 
     to the existing ad valorem tax, would be comparable to the 
     taxes on oil and gas production collected in other producing 
     states. The legislature studied various severance tax 
     proposals for three years. Oil and gas severance and property 
     tax in neighboring states were studied carefully. A 
     comparative chart used by the Senate Tax Committee is passing 
     the severance tax is enclosed with the attached Memo of 
     Severance and Property Taxes prepared by the Kansas 
     Legislative Research Department during the 1981 severance tax 
     debate.
       One of the issues raised during legislative debate was 
     whether both a severance tax and an ad valorem tax on gas 
     could be added to the maximum lawful price of gas as 
     established by the Federal Energy Regulatory Commission 
     (FERC). We were advised that this was allowed in Wyoming, 
     Colorado and other producing states, and that FPC Opinions 
     699-D allowed the pass through of the Kansas ad valorem tax. 
     This Opinion had been specifically requested by the Kansas 
     Attorney General and the Kansas Legislature relied on Opinion 
     699-D without further question.
       Finally, in 1983, the Kansas Legislature passed a severance 
     tax ``in addition to'' the existing ad valorem tax. A credit 
     against the severance tax for ad valorem taxes paid was added 
     to the bill resulting in a 7% severance tax on gas and a 
     4.33% tax on oil. Clearly,

[[Page E1676]]

     tax policy for our state was based on the Legislature's 
     reliance on FPC Opinion 699-D. Were it not for our reliance 
     on Opinion 699-D, the severance tax would not have passed 
     without amending our state's ad valorem tax to conform to 
     federal requirements for pass through of both the severance 
     and ad valorem taxes as was done in Wyoming and Colorado.
       When Kansas passed the severance tax in 1983, Northern 
     Natural Gas Company asked the FERC to reconsider its Opinion 
     699-D to prohibit Kansas producers from passing through both 
     a severance tax and a property tax. They were denied twice by 
     the FERC. In 1988, Colorado Interstate Gas Company appealed 
     the FERC decision to the Washington, D.C., Circuit Court of 
     Appeals. I am sure you are familiar with the whole scenario 
     that has followed. Nineteen years after Opinion 699-D was 
     issued, the FERC, with incentive from the Washington, D.C., 
     Court in the Colorado Interstate Case, reversed itself. Later 
     the court would require retroactive refunds to 1983 based on 
     notice of hearings published in the federal register. Now, 
     because the Kansas Legislature relied on Opinion 699-D to 
     pass a severance tax without adjusting the methodology by 
     which the Kansas ad valorem wax was calculated, many Kansas 
     independent oil and gas producers are devastated.
       What could the Kansas Legislature have done further to 
     determine the reliability of Opinion 699-D? Should we have 
     asked for a second ruling on the same issue? Would that have 
     allowed Kansas to rely on the Opinion? Would three, four or 
     five opinions have allowed Kansas to rely on the ruling? Was 
     there someone the State could have sued to get final 
     determination that we could rely on before we passed the 
     severance tax? How can a state ever rely on a federal 
     regulatory ruling if a court can in the future retroactively 
     change the law and require innocent victims who complied with 
     the law to refund large sums of money with interest?
       Certainly Kansas producers have done their part to provide 
     consumers with an abundant supply of clean, cheap fuel. But 
     why are consumers up in arms? In 1998, the price of natural 
     gas paid to producers at the wellhead in Kansas averaged less 
     than $1.96 per mcf. The price of natural has at the 
     residential burner tip, however, averaged $6.82 in the 
     U.S.A., with prices ranging from less than $5 to over $12 per 
     mcf from time to time. Since FERC Order 636 passed, the price 
     of natural gas paid to producers at the wellhead has gone 
     down while the price of natural gas paid by residential 
     consumers has gone up. The middlemen's share of the 
     residential consumer's dollar has increased from 59% to 73% 
     while the producer's share has decreased from 41% to 27%. 
     Both producers and consumers are losers in this environment 
     while the giant interstate pipelines and local distribution 
     companies have seen profits rise dramatically.
       Now, I understand, the primary beneficiaries of 
     deregulation--the interstate pipelines and local distribution 
     companies--are before the Energy and Power Subcommittee in 
     the name of consumer protection. How much of the refund will 
     ultimately reach the consumer is undetermined at this time, 
     but I am advised that any residential consumer likely will 
     receive no more than $15 over a period of time. However, the 
     total of these de minimis refunds, and what is not passed 
     through to the consumer, equals the estimated drilling and 
     exploration budget for all of Kansas for the next three and 
     one-half years.
       As Democrats, we need to stand up for what is right and 
     fair in America. Consumer protection is an enormously 
     powerful political force but honest, hardworking producers 
     deserve no less. Kansas producers were perhaps the only 
     innocent parties in this entire scenario, caught between 
     consuming states whose people believe they have a right to 
     cheap fuel, and the governments of producing states who 
     believe they have a right to tax oil and gas producers into 
     oblivion.
       This is not a consumer protection issue. I do not believe 
     that consumers in Kansas, Missouri, Colorado, Michigan or any 
     other state will benefit in any way from this restorative 
     reversal of law by the Federal Energy Regulatory Commission. 
     A minuscule refund to a long lost consumer cannot offset the 
     losses which will result from the destruction of honest, 
     hardworking, productive citizens. Exploration in Kansas is 
     almost totally dependent on small independent operators who 
     provide an invaluable resource to consumers across this 
     country. The destruction of this vital Kansas industry is not 
     in anyone's best interest. I strongly urge you to support 
     Congressman Moran's legislation to eliminate this serious 
     injustice.
           Sincerely,
                                                  Anthony Hensley,
                                    Kansas Senate Minority Leader.


     
                                  ____
  On Or After January 1, 1973, And New Dedications Of Natural Gas To 
   Interstate Commerce On Or After January 1, 1973, Opinion No. 699-D

  Declaratory Order on Petition for Clarification (Issued October 9, 
                                 1974)

       Before Commissioners: John N. Nassikas, Chairman; Albert B. 
     Brooke, Jr., Rush Moody, Jr., William L. Springer, and Don S. 
     Smith.
       The State Corporation Commission of the State of Kansas 
     (Kansas) on August 29, 1974, filed a request for 
     clarification of Opinion No. 699 concerning the right of 
     producers making jurisdictional sales in Kansas covered by 
     that opinion to adjust upward the national rate prescribed 
     therein by the amount of the Kansas ad valorem tax.
       Opinion No. 699 provides in Ordering Paragraph A(3) (mimeo 
     p. 141) that the national rate established there ``shall be 
     adjusted upward for all State or Federal production, 
     severance, or similar taxes * * *''. The question presented 
     is whether the Kansas ad valorem tax is a similar tax within 
     the meaning of the above provision. A number of other states 
     also have an ad valorem tax, and our determination here will 
     not be limited to the Kansas ad valorem tax, but will apply 
     to ad valorem taxes in general.
       As Kansas points out, the bulk of the Kansas ad valorem tax 
     is based upon production factors, and, as such, is in fact, a 
     severance or production tax merely bearing the title ``ad 
     valorem tax''. The ad valorem tax in some other states is 
     also similar to a production or severance tax inasmuch as it 
     is based on the amount of production and the revenues 
     therefrom. Consequently, we conclude that it is proper under 
     Opinion No. 699 for producers to adjust the national rate 
     upward for a state ad valorem tax where such tax is based on 
     production factors.


              severance and property taxes on oil and gas

                               Background

       This memorandum presents an overview of the severance taxes 
     and property taxes levied on oil and gas properties in the 
     major producing states and the states surrounding Kansas. A 
     summary of the severance tax rates and property taxes in such 
     states is contained in Table 1.
       Severance Taxes. A severance tax is a tax imposed on the 
     production, or the ``severing,'' of a mineral from the earth. 
     The production of the mineral may be measured either by the 
     value or the volume of the mineral produced. Among states 
     basing a severance tax on the value of production, some tax 
     the gross value of production, while others tax a net value 
     figure, allowing deductions for expenses such as 
     transportation costs, federal or state royalties, losses from 
     evaporation or uneconomic production, and disposal of useless 
     byproducts such as salt water. The rate of severance taxes 
     based on value may be a fixed percentage of value or may be 
     graduated to apply lower rates to low-income or low-
     production wells.
       The rationale usually presented for imposing a severance 
     tax is that the state should be compensated for the 
     irretrievable loss of a nonrenewable resource and for the 
     cost to the state's residents resulting from the development 
     of that resource. States which have imposed severance taxes 
     have used those tax receipts for various purposes, including 
     school finance, property tax relief, highway finance, 
     creation of trust funds, and distribution to local 
     governmental units.
       A severance tax may be either ``in lieu of'' or ``in 
     addition to'' property taxes on oil or gas properties. An 
     ``in lieu of'' severance tax exempts oil and gas properties 
     from the general property tax.
       Property Taxes. Taxes on real and personal property have 
     traditionally been a major source of funding for the 
     activities carried on by state and local governments. 
     Applying a property tax to oil and gas properties typically 
     involves determining the value of minerals in the ground and 
     the value of the production equipment. States imposing 
     property taxes have usually chosen one of three methods to 
     value the minerals: value of production; formula valuation; 
     or token assessment.
       Annual production assessment applies the property tax levy 
     to the value of production, which might be either gross or 
     net value.
       Formula valuation attempts to value reserves by estimating 
     the average life of a well, rate of discount, and the 
     estimated value of future production.
       Token assessment would apply the property tax to a minimal 
     amount of value, either per acre of lease or per well.

                            National Summary

       Severance taxes on oil and gas have been enacted in 27 
     states, including states such as Kansas which have enacted 
     relatively minor severance taxes based on the volume of 
     production for regulatory, rather than revenue, purposes. 
     Seventeen of those 27 states have enacted ``significant'' 
     severance taxes--a tax at the rate of 2 percent or more of 
     value. Six of the 17 states with significant severance taxes 
     impose their tax in lieu of the property tax.

                                 Kansas

       Oil and gas leaseholds, including royalty interests and 
     equipment used in production, are assessed as tangible 
     personal property in Kansas. Guides for assessing oil and gas 
     properties have been prescribed by the Director of Property 
     Valuation, Department of Revenue, for use by county 
     appraisers. After appraised values are determined, the 
     properties are assessed at 30 percent of such values and are 
     subject to the total general property tax rate according to 
     the situs of the property.
       According to Table 3, prepared by the Department of 
     Revenue, Division of Property Valuation, oil and gas 
     properties paid almost $95 million in property taxes in 1980, 
     up from $60.5 million in 1979.
       According to the Kansas Geological Survey, oil and gas 
     production in Kansas for the last two years was as follows:

[[Page E1677]]



----------------------------------------------------------------------------------------------------------------
                                                               1979                            1980
                                      Unit       ---------------------------------------------------------------
                                                     Quantity     Value $(1,000)     Quantity     Value $(1,000)
----------------------------------------------------------------------------------------------------------------
Oil...........................  1,000 barrels...          56,995      $1,245,015          60,140      $2,049,581
Gas...........................  million cubic            804,535         548,693         772,998         643,134
                                 feet (m.m.c.f.).
                                                                 ----------------                ---------------
Natural Gas Liquids...........  1,000 barrels...          33,888         292,791          34,000         352,512
                                                                      $2,086,499                      $3,045,227
----------------------------------------------------------------------------------------------------------------

       Thus, using the above oil and gas property tax figures, 
     property taxes statewide averaged 3.1 percent of value and 
     2.9 percent of value in 1980 and 1979, respectively. Of 
     course, the ratio of property taxes to value varies from 
     lease to lease and county to county.
       The biggest factor in the increase in property taxes 
     between 1979 and 1980 was the increase in the price of oil. 
     The calculation of the value of the gross reserves of oil is 
     the most important step in valuing the oil lease. This value 
     is calculated by multiplying the total annualized production 
     for the previous year times a net price figure times a 
     present worth factor. In the 1979 Oil and Gas Appraisal 
     Guide, the highest price of stripper oil was $16.10; in 1980, 
     this same oil sold for approximately $38, and the net price 
     figure used in the 1980 Guide was $31.56. These price figures 
     reflect actual selling prices of oil and the world-wide 
     increases in prices. The 1981 net price figures are not yet 
     available.
       Equipment values shown in the 1980 Guide were also higher 
     than those in the 1979 Guide. This increase was due to the 
     fact that the equipment values had not been updated for 
     several years and reflected the increase in the value of 
     equipment that has accompanied the increase in the price of 
     oil. The number of years of income considered was raised from 
     five to eight years; this also raised the valuation of the 
     property.
       Several changes reflected in the 1980 Guide would have had 
     the effect of lowering values. These changes were raising the 
     discount factor and changing the low production credit. The 
     discount factor reflects the present value of money to be 
     received at a specified time in the future. The low 
     production credit is a reduction for wells with very low 
     production levels.
       Changes in the 1981 Guide include accounting for 
     differences in production quality and expenses between 
     eastern and western Kansas wells. One such difference is that 
     the 1981 Guide will consider a 5 year income for the shallow 
     eastern Kansas wells, while an 8 year income will be used for 
     the deeper western Kansas wells.
       In addition to the property tax, oil and gas producers, 
     like other businesses, also pay sales and income taxes. Oil 
     and gas producers also pay taxes or fees for antipollution 
     and conservation activities of the state. The oil and gas 
     production tax, for pollution control, is levied at the rate 
     of $.001 per barrel for each barrel of oil and $.00005 for 
     each one thousand cubic feet of gas produced. The 
     conservation assessment is $.003 per barrel of oil and $.0008 
     for each one thousand cubic feet of gas.
       The Federal Energy Regulatory Commission has ruled that the 
     Kansas property tax is essentially based on production and 
     has allowed this tax to be ``passed-on'' to consumers. More 
     than one production tax on natural gas (the only type of 
     energy production whose price is still controlled) may be 
     passed on. Both the property tax and the two regulatory taxes 
     in Kansas are currently being passed on. Other states and the 
     F.E.R.C. have also reported that natural gas producers are 
     able to pass-on more than one production tax, as long as 
     intrastate and interstate sales of natural gas are taxed 
     equally.
       A severance tax, if enacted in Kansas, would have an impact 
     on oil and gas property tax appraisals by lowering net prices 
     figures used in the Guide. The Guide uses the price actually 
     paid to the producer on January 1 of the assessment year less 
     state and federal wellhead taxes levied on value or volumes 
     produced, and less applicable transportation charges. Thus, 
     the federal Crude Oil Windfall Profit Tax (WPT) was deducted 
     from the sales price of oil. (Appended to this memorandum is 
     a summary of the Windfall Profit Tax.) An 8 percent severance 
     tax could lower the net price figure per barrel for oil from 
     $31.70 to $29.16, as follows:


Current sales price--1 barrel of oil.............................$38.00
Base price for WPT...............................................-17.00
                                                             __________
                                                             
Windfall profit for WPT...........................................21.00
WPT rate for independents on stripper oil........................ x 30%
                                                             __________
                                                             
WPT liability......................................................6.30
Current sales price--1 barrel of oil.............................$38.00
WPT liability.....................................................-6.30
                                                             __________
                                                             
Net price with WPT...............................................$31.70
                                                               ==========
_______________________________________________________________________

Windfall profit for WPT..........................................$21.00
WPT severance tax adjustment (8%).................................-1.68
                                                             __________
                                                             
Net windfall profit...............................................19.32
WPT rate for independents on stripper oil........................ x 30%
                                                             __________
                                                             
WPT liability......................................................5.80
Current sales price--1 barrel of oil.............................$38.00
Severance tax..................................................... x 8%
                                                             __________
                                                             
Severance tax liability...........................................$3.04

WPT liability.....................................................$5.80
Severance tax liability...........................................+3.04
                                                             __________
                                                             
WPT and severance tax liability...................................$8.84

Current sales price--1 barrel of oil.............................$38.00
WPT and severance tax liability...................................-8.84
                                                             __________
                                                             
Net price with WPT and 8% severance tax..........................$29.16
                                                               ==========
_______________________________________________________________________



       The Legislative Research Department is not yet able to 
     estimate the effect of a severance tax on property tax 
     appraisals. A reduction in the net price figures does not 
     necessarily mean that assessed valuations of oil and gas 
     properties will fall--but it does at least mean that such 
     valuations would not be as high as they otherwise might be if 
     no severance tax were enacted. Decontrol of all oil prices, 
     and rising prices for oil and gas are some factors that could 
     lead to increases on oil and gas valuations, even if a 
     severance tax were enacted.
       At least two opinions of former Kansas Attorneys General 
     have stated that either an ``in addition to'' or ``in lieu 
     of'' severance tax could be constitutionally enacted in 
     Kansas. Article 11, Section 1, of the Kansas Constitution 
     specifically authorizes the legislature to classify ``mineral 
     products'' for purposes of taxation. In an opinion dated 
     September 13, 1954, the Attorney General concluded: ``. . . 
     it is our opinion that a gross production or severance tax 
     would probably be constitutional if levied to the exclusion 
     of property taxes or if levied in addition to property taxes 
     on mineral products. We do not believe that a provision 
     exempting the equipment and other property used in production 
     would be constitutional.''
       The above opinion was confirmed in another opinion, dated 
     June 5, 1969: ``We have studied the (1954) opinion and agree 
     with his conclusion stated therein. We are unable to find any 
     recent case which would alter that conclusion. However, we 
     would again emphasize that a severance tax act could not 
     exempt the equipment and other property used in the 
     production of oil and gas from ad valorem taxes.''
       A 1 percent severance tax on oil gas production was enacted 
     on the last day of the 1957 Session. This tax was an ``in 
     addition to'' severance tax. During the first six months 
     after enactment, over $2 million was collected. This tax was 
     held to be invalid by the Kansas Supreme Court, however, in 
     the case State, ex. rel. v. Kirchner, 182 Kan. 437 (1958). 
     The Court held that the bill enacting the tax was 
     unconstitutional because the subject of the act was not 
     clearly expressed in its title.

                                   OIL AND GAS SEVERANCE AND PROPERTY TAXES IN MAJOR PRODUCING AND NEIGHBORING STATES
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Severance taxes (not including regulatory taxes)
                              -------------------------------------------------------------------------
            State                                Severance tax                                            1980 property tax as estimated percentage of
                                Oil severance      in lieu of     Exemptions or   Other minerals taxed                 value of production
                                   tax rate       property tax     lower rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alaska.......................  12.25%.........  No.............  No.............  Gas-10%.............  NA.
California...................  ...............  No.............  No.............  ....................  3.8% (includes equipment).
Colorado.....................  2%-5%..........  No.............  Yes \1\........  Gas-2%-5%; Coal-60    5.4% (percentage does not include tax on
                                                                                   cents per ton,        equipment).
                                                                                   indexed to price;
                                                                                   oil shale-4%;
                                                                                   metallic minerals.
Kansas.......................  ...............  ...............  ...............  ....................  3.1% (includes equipment).
Louisiana....................  12.5%..........  Yes............  Yes \2\........  Gas-7 cents per       ................................................
                                                                                   m.c.f.; coal-10
                                                                                   cents per ton;
                                                                                   gravel; marble;
                                                                                   ores; salt; sand;
                                                                                   shells; stone;
                                                                                   sulphur; timber.
Mississippi..................  6.0%...........  Yes............  No.............  Gas-6%; salt........  ................................................
Nebraska.....................  2%.............  No.............  No.............  Gas-2%..............  NA.
New Mexico...................  3.75% plus       No.............  Yes \3\........  Gas-11.1 cents per    1.6% (includes equipment).
                                privilege tax                                      m.c.f. (includes
                                of 2.55%.                                          surtax tied to
                                                                                   C.P.I.) plus
                                                                                   privilege tax of
                                                                                   2.55% of value;
                                                                                   Coal-$.57 per ton
                                                                                   plus surtax tied to
                                                                                   C.P.I.; Uranium;
                                                                                   other minerals.

[[Page E1678]]

 
North Dakota.................  5% plus 6.5%     Yes............  Yes \4\........  Gas-5%; coal-85       ................................................
                                oil extraction                                     cents per ton;
                                tax.                                               indexed for
                                                                                   inflation.
Oklahoma.....................  7.085%.........  Yes............  No \5\.........  Gas-7.085%; asphalt;  ................................................
                                                                                   lead; zinc; jack;
                                                                                   gold; silver; or
                                                                                   other ores.
South Dakota.................  4.5%...........  No \6\.........  No.............  Gas-4.5%; coal-4.5%.  NA.
Texas........................  4.6%...........  No.............  No.............  Gas-7.5%; sulphur;    2.0% (percentage does not include tax on
                                                                                   cement.               equipment).
Wyoming......................  4.0%...........  No.............  Yes \7\........  Gas-4%; Coal-10.5%;   6.5% (percentage does not include tax on
                                                                                   Uranium; Trona; Oil   equipment)
                                                                                   shale-2%.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Tax on oil and gas is based on ``gross income,'' defined as market value at wellhead or the value of the severer's income as computed for Colorado
  and federal income tax depletion purposes, whichever is higher.
 
 Gross income and rate of tax:
Under $25,000: 2%;
$25,000 and under $100,000; 3%;
$100,000 and under $300,000: 4%;
$300,000 and over: 5%.
 
 Stripper oil wells (less than 10 barrels per day) are exempt. A credit is allowed for 87.5 percent of all property taxes paid during the tax year,
  excluding property taxes upon equipment and facilities.
\2\ Oil: Wells incapable of producing more than 25 barrels of oil per day which also produce at least 50 percent salt water per day, 6\1/4\ percent;
  wells incapable of producing more than 10 barrels of oil per day, 3\1/8\ percent; natural gas liquids, 10 percent; gas at 15.025 pounds per square
  inch pressure, 7 cents per m.c.f.; gas from oil well at 50 pounds per square inch pressure; 3 cents; gas from well incapable of producing average of
  250,000 cubic feet per day, 1.3 cents. Working interest owners in an oil or gas well that discover a new field are exempt from 50 percent of all
  severance taxes for the first 24-months, up to a certain amount.
\3\ A severance tax credit is allowed if a contract entered into by producer prior to 1-1-77 or a federal regulation does not allow the producer to
  obtain reimbursement from the purchaser for all or part of the increased severance tax (rates were revised July 1, 1980). When computing the value of
  oil for the severance tax or the value of oil and gas for the privilege tax, a deduction is allowed for royalties paid to the United States, the state
  of New Mexico or any Indian or Indian tribe, as well as for the reasonable expense of trucking any product to market.
\4\ Oil: stripper oil and a limited amount of royalty interest oil is exempt from the oil extraction tax.
\5\ Former lower rates on low-producing oil or gas wells were repealed in 1980.
\6\ Mineral reserves are not subject to property tax. No personal property is taxed in South Dakota, so only oil and gas equipment forming a part of
  realty is subject to the property tax.
\7\ Oil: stripper oil taxed at 2 percent rate.
 
 Source: State Tax Guide, Commerce Clearing House, and conversations with state officials.

    Table 2.--Summary of Property Taxes in States Listed in Table 1

       California. Valuing oil and gas properties in California 
     has been reported to be the ``biggest problem under 
     Proposition 13.'' State uses a formula valuation procedure, 
     using 1975 values, plus 2 percent increase per year. Property 
     tax treatment of oil and gas is currently under legislative 
     study.
       Colorado. Oil and gas assessed at 87.5 percent of the value 
     of production; stripper at 75 percent of value. Mill levy is 
     then applied to assessed value, averaging 62 mills in the 
     highest producing counties. Equipment is assessed at 30 
     percent of 1973 market value, with the use of a state 
     appraisal guide.
       Kansas. Uses formula valuation for appraisal, assessed at 
     30 percent, then mill levy applied to assessed value.
       Nebraska. Uses same basic appraisal technique at Kansas.
       New Mexico. Has an ad valorem production and an ad valorem 
     equipment tax.
       South Dakota. Oil and gas reserves are not taxed. No 
     personal property is taxed. Therefore, the property tax on 
     oil and gas applies only to equipment forming a part of the 
     realty.
       Texas. Property currently appraised by each taxing unit. In 
     1982 appraisal will be done by one countrywide appraisal 
     using a standard appraisal guide. Reserves valued on formula 
     valuation method. Equipment valued separately as personal 
     property.
       Wyoming. Property tax on reserves is calculated by applying 
     mill levy to full market value of production. Equipment above 
     ground is valued at 25 percent of its 1967 replacement cost; 
     in 1982 the base year for equipment values may be 1981 
     replacement cost.


[[Page E1679]]



                       SENATE COMMITTEE MEETINGS

  Title IV of Senate Resolution 4, agreed to by the Senate on February 
4, 1977, calls for establishment of a system for a computerized 
schedule of all meetings and hearings of Senate committees, 
subcommittees, joint committees, and committees of conference. This 
title requires all such committees to notify the Office of the Senate 
Daily Digest--designated by the Rules committee--of the time, place, 
and purpose of the meetings, when scheduled, and any cancellations or 
changes in the meetings as they occur.
  As an additional procedure along with the computerization of this 
information, the Office of the Senate Daily Digest will prepare this 
information for printing in the Extensions of Remarks section of the 
Congressional Record on Monday and Wednesday of each week.
  Meetings scheduled for Thursday, July 29, 1999 may be found in the 
Daily Digest of today's Record.

                           MEETINGS SCHEDULED

                                JULY 30
     10 a.m.
       Foreign Relations
       International Operations Subcommittee
         To hold hearings on United States policy toward victims 
           of torture.
                                                            SD-419
     11:30 a.m.
       Banking, Housing, and Urban Affairs
         To hold hearings on the nomination of Harry J. Bowie, of 
           Mississippi, to be a Member of the Board of Directors 
           of the National Consumer Cooperative Bank; the 
           nomination of Armando Falcon, Jr., of Texas, to be 
           Director of the Office of Federal Housing Enterprise 
           Oversight, Department of Housing and Urban Development; 
           the nomination of Robert Z. Lawrence, of Massachusetts, 
           to be a Member of the Council of Economic Advisers; the 
           nomination of Martin Baily, of Maryland, to be Chairman 
           of the Council Economic Advisors; and the nomination of 
           Dorian Vanessa Weaver, of Arkansas, to be a member of 
           the Board of Directors of the Export-Import Bank.
                                                            SD-538

                                AUGUST 3
     9:30 a.m.
       Energy and Natural Resources
         To hold hearings on S. 1052, to implement further the Act 
           (Public Law 94-241) approving the Covenant to Establish 
           a Commonwealth of the Northern Mariana Islands in 
           Political Union with the United States of America.
                                                            SD-366
       Armed Services
         To hold hearings on the nomination of Charles A. 
           Blanchard, of Arizona, to be General Counsel of the 
           Department of the Army; and the nomination of Carol 
           DiBattiste, of Florida, to be Under Secretary of the 
           Air Force.
                                                            SR-222
     10 a.m.
       Indian Affairs
         To hold hearings on proposed legislation to provide 
           equitable compensation to the Cheyenne River Sioux 
           Tribe.
                                                            SR-485
       Environment and Public Works
         Business meeting to resume markup of S. 1090, to 
           reauthorize and amend the Comprehensive Environmental 
           Response, Liability, and Compensation Act of 1980.
                                                            SD-406
       Governmental Affairs
         Business meeting to consider pending calendar business.
                                                            SD-342
     2:30 p.m.
       Indian Affairs
         To hold hearings on S. 692, to prohibit Internet 
           gambling.
                                                            SR-485

                                AUGUST 4
     8:30 a.m.
       Judiciary
         To hold hearings on the nomination of David W. Ogden, of 
           Virginia, to be an Assistant Attorney General; and the 
           nomination of Robert Raben, of Florida, to be an 
           Assistant Attorney General.
                                                            SD-628
     9:30 a.m.
       Indian Affairs
         To hold hearings on S. 299, to elevate the position of 
           Director of the Indian Health Service within the 
           Department of Health and Human Services to Assistant 
           Secretary for Indian Health; and S. 406, to amend the 
           Indian Health Care Improvement Act to make permanent 
           the demonstration program that allows for direct 
           billing of medicare, medicaid, and other third party 
           payors, and to expand the eligibility under such 
           program to other tribes and tribal organizations; 
           followed by a business meeting to consider pending 
           calendar business.
                                                            SR-485
     10 a.m.
       Judiciary
         To hold hearings on S. 1172, to provide a patent term 
           restoration review procedure for certain drug products, 
           focusing on proposed remedies for relief, relating to 
           pipeline drugs.
                                                            SD-628
     10:30 a.m.
       Foreign Relations
         To hold hearings on S. 693, to assist in the enhancement 
           of the security of Taiwan.
                                                            SD-419
       Governmental Affairs
       Oversight of Government Management, Restructuring and the 
           District of Columbia Subcommittee
         To hold hearings on overlap and duplication in the 
           Federal Food Safety System.
                                                            SD-342
     2 p.m.
       Judiciary
       Immigration Subcommittee
         To hold hearings on annual refugee consultation.
                                                            SD-628
     2:15 p.m.
       Energy and Natural Resources
       National Parks, Historic Preservation, and Recreation 
           Subcommittee
         To hold oversight hearings to review the performance 
           management process under the requirements of the 
           Government Performance and Results Act, by the National 
           Park Service.
                                                            SD-366
       Commerce, Science, and Transportation
         To hold hearings to examine fraud against seniors.
                                                            SR-253

                                AUGUST 5
     9:30 a.m.
       Banking, Housing, and Urban Affairs
       Housing and Transportation Subcommittee
         To hold oversight hearings on activities of the Office of 
           Multifamily Housing Assistance Restructuring of the 
           Department of Housing and Urban Development.
                                                            SD-538
     10 a.m.
       Judiciary
         Business meeting to consider pending calendar business.
                                                            SD-628

                              SEPTEMBER 28
     9:30 a.m.
       Veterans' Affairs
         To hold joint hearings with the House Committee on 
           Veterans' Affairs to review the legislative 
           recommendations of the American Legion.
                                               345 Cannon Building