Brazil's Rio de Janeiro state moved ahead with a plan to raise 1.84 billion reais (US$522 million) in oil and gas taxes per year to help close a budget shortfall that has led to school and hospital closures and delayed salary and pension payments.

A decree governing how the 2.71 reais (77 cents) per barrel environmental levy passed by the state legislature late last year will be collected and used was published on April 28 in Rio de Janeiro's Diario Oficial, the state's publication of record.

Rio de Janeiro is responsible for two-thirds of Brazil's oil output and 40% of its natural gas. The tax will add to the costs of an already high-cost offshore oil industry and comes at the worst possible time following the slump in oil prices, Brazil's oil industry association IBP said on April 27.

The IBP is challenging the levy in court.

In February, a source involved in talks between the state and oil industry executives told Reuters Rio de Janeiro planned to scrap the tax to help protect the local economy.

Since then oil prices have rebounded 38% and unpaid workers and pensioners have won injunctions against the state government ordering immediate payment of late salaries and pensions, money that the state says it does not have.

The state also outlined the rules governing a new environmental levy on electricity generation, transmission and distribution. The tax essentially directs an environmental levy currently paid to the federal government to the state government.

According to the O Globo daily newspaper, the state hopes to get 215 million reais (US$61 million) from the electricity tax.

(US$1 = 3.5260 Brazilian reais)