H1401B2610A04529 BIL:EJH 10/24/17 #90 A04529
AMENDMENTS TO HOUSE BILL NO. 1401
Sponsor: REPRESENTATIVE MAHER
Printer's No. 2610
Amend Bill, page 1, lines 1 through 11, by striking out all
of said lines and inserting
Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated
Statutes, in unconventional gas well fee, repealing
expiration and providing for volumetric severance tax.
Amend Bill, page 28, lines 29 and 30; pages 29 through 35,
lines 1 through 30; page 36, lines 1 through 22; by striking out
all of said lines on said pages and inserting
Section 1. Section 2318 of Title 58 of the Pennsylvania
Consolidated Statutes is repealed:
[§ 2318. Expiration.
(a) Notice.--The Secretary of the Commonwealth shall, upon
the imposition of a severance tax on unconventional gas wells in
this Commonwealth, submit for publication in the Pennsylvania
Bulletin notice of the imposition.
(b) Date.--This chapter shall expire on the date of the
publication of the notice under subsection (a).]
Section 2. Title 58 is amended by adding a part to read:
PART IV
TAXATION
Chapter
51. Volumetric Severance Tax
CHAPTER 51
VOLUMETRIC SEVERANCE TAX
§ 5101. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Average annual price of natural gas." As defined in section
2301 (relating to definitions).
"Commission." The Pennsylvania Public Utility Commission.
"Department." The Department Of Environmental Protection Of
The Commonwealth.
"Gross proceeds." Money generated from the sale by a lessee
of oil, natural gas or gas of any other designation or their
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constituents removed or recovered under a lease in an arms-
length transaction designated and fixed at the actual point of
sale.
"Lease." An agreement conveying to a lessee the right to
remove or recover oil, natural gas or gas of any other
designation from land of the lessor.
"Meter." A device to measure the passage of volumes of gases
or liquids past a certain point.
"Natural gas." As defined in section 2301.
"Producer." As defined in section 2301.
"Royalty payment." A payment made by a lessee to a lessor in
accordance with a lease.
"Sever." The extraction or other removal of natural gas from
an unconventional formation in this Commonwealth. The term does
not include natural gas, in gaseous or liquid form, which is
burned, used, consumed or otherwise employed in oil and gas
operations at a natural gas well site:
(1) for secondary recovery;
(2) for re-pressuring;
(3) for pressure maintenance; or
(4) as fuel for equipment.
"Storage field." A natural gas formation or other side that
is used to store natural gas that did not originate from and has
been transplanted into the formation or site.
"Trigger date." The date 60 days after the effective date of
this section.
"Unconventional formation." As defined in section 2301.
"Unconventional gas well." As defined in section 2301.
"Unit." A thousand cubic feet (MCF) of natural gas at a
temperature of 60 degrees Fahrenheit and an absolute pressure of
14.73 pounds per square inch, in accordance with American Gas
Association (AGA) standards and according to Boyle's law for the
measurement of gas under varying pressures with deviations
therefrom as follows:
(1) The average absolute atmospheric pressure shall be
assumed to be 14.4 pounds to the square inch, notwithstanding
the actual elevation or location of point of delivery above
sea level or variations in the atmospheric pressure.
(2) The temperature of the gas passing the meters shall
be determined by the continuous use of a recording
thermometer installed so that the thermometer may properly
record the temperature of the gas flowing through the meters.
The arithmetic average of the temperature recorded each 24-
hour day shall be used in computing gas volumes. If a
recording thermometer is not installed, or if installed and
not operating properly, an average flowing temperature of 60
degrees Fahrenheit shall be used in computing gas volume.
(3) The specific gravity of the gas shall be determined
by tests made by the use of an Edwards or Acme gravity
balance annually or at intervals as are found necessary in
practice. Specific gravity shall be used in computing gas
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volumes.
(4) The deviation of the natural gas from Boyle's law
shall be determined by tests annually or at other shorter
intervals as are found necessary in practice. The apparatus
and the method to be used in making the tests shall be in
accordance with recommendations of the National Bureau of
Standards of the Department of Commerce or Report No. 3 of
the Gas Measurement Committee of the American Gas
Association, or any amendments of the report. The results of
the tests shall be used in computing the volume of gas
delivered.
"Wellhead meter." A meter placed at a producing site to
measure the actual volume of natural gas severed.
§ 5102. Volumetric severance tax.
(a) Imposition.--Each producer subject to the unconventional
gas well fee imposed under section 2302 (relating to
unconventional gas well fee) shall pay a volumetric severance
tax.
(b) Computation.--The volumetric severance tax for each
unconventional gas well shall be calculated by applying the
applicable rate under subsection (c) to natural gas severed from
the unconventional gas well during the imposition period under
subsection (d).
(c) Tax rate.--The tax rate shall be as follows:
(1) If the average annual price of natural gas for the
calendar year immediately preceding the start of the
imposition period is less than $3.00, the surcharge rate
shall be $0.02 per unit severed.
(2) If the average annual price of natural gas for the
calendar year immediately preceding the start of the
imposition period is greater than $3.00 and less than $5.00,
the tax rate shall be $0.025 per unit severed.
(3) If the average annual price of natural gas for the
calendar year immediately preceding the start of the
imposition period is greater than $4.99 and less than $6.00,
the tax rate shall be $0.03 per unit severed.
(4) If the average annual price of natural gas for the
calendar year immediately preceding the start of the
imposition period is greater than $5.99, the tax rate shall
be $0.035 per unit severed.
(d) Imposition period.--The imposition period shall be as
follows:
(1) For fiscal year 2017-2018, the imposition period
shall be from October 1, 2017, to April 30, 2018.
(2) For fiscal year 2018-2019, and each fiscal year
thereafter, the imposition period shall be from May 1 of the
preceding fiscal year to April 30 of the current fiscal year.
(e) Payment.--The volumetric severance tax imposed under
this chapter shall be due on the same day the report is due
under subsection (f). The tax shall become delinquent if not
remitted to the commission on the reporting date.
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(f) Report.--By June 15, 2018, and June 15 of each year
thereafter, each producer shall submit payment of the volumetric
severance tax to the commission and a report on a form
prescribed by the commission for the imposition period.
(g) Exemptions.--The volumetric severance tax imposed under
this chapter shall not be imposed on the following:
(1) natural gas severed, sold and delivered by a
producer at or within five miles of the producing site for
the processing or manufacture of tangible personal property
as defined under section 201 of the act of March 4, 1971
(P.L.6, No.2), known as the Tax Reform Code of 1971;
(2) natural gas severed under a natural gas lease and
provided to a lessor for no consideration for the lessor's
own use; or
(3) natural gas severed from a storage field.
(h) Volume measurement.--
(1) Except as provided under paragraph (2), for purposes
of computing the volumetric severance tax, natural gas
severed shall be measured at the wellhead meter.
(2) Natural gas severed prior to the trigger date shall
be measured according to the standards and methods used for
reporting natural gas production to the department.
(i) Administration.--The volumetric severance tax shall be
administered and enforced in the same manner as the
unconventional gas well fee under Chapter 23 (relating to
unconventional gas well fee).
(j) Use of money.--Money collected from the volumetric
severance tax under this section shall be transferred to the
State Treasurer to be deposited into the General Fund.
(k) Independent Fiscal Office.--Beginning September 30,
2018, and quarterly thereafter, the Independent Fiscal Office
shall publish a report on its publicly accessible Internet
website that shows the calculation of an average effective tax
rate of the volumetric severance tax imposed under this chapter
and the unconventional gas well fee imposed under Chapter 23,
imposed for the preceding imposition period. The average
effective tax rate shall quantify the implicit tax burden
imposed on a producer by both the volumetric severance tax and
the unconventional gas well fee in a given year. The average
effective tax rate shall be based upon the market value of
natural gas at the wellhead using regional price information
from hubs located in this Commonwealth and postproduction costs
shall be deducted to approximate the value of natural gas at the
wellhead. The report shall include the methodology used to
calculate the average effective tax rate.
(l) Payment of tax.--A producer may not make the tax imposed
under this section on natural gas severed under a lease an
obligation, indebtedness or liability of the lessor and may not
otherwise require the lessor to reimburse the producer for the
amount of the tax.
§ 5103. Minimum royalty.
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(a) Amount.--
(1) The minimum royalty payment made under the act of
July 20, 1979 (P.L.183, No.60), known as the Oil and Gas
Lease Act, to a lessor under a lease may not be less than
one-eighth of the gross proceeds received by the lessee for
the oil, natural gas or gas of any other designation
recovered by the lessee under the lease.
(2) A deduction or allocation of costs, expenses or
other adjustments may not be taken or made to gross proceeds
before calculating the amount of a royalty payment due to a
lessor under paragraph (1).
(b) Applicability.--The requirement to pay a minimum royalty
under subsection (a) shall only apply to oil, natural gas or gas
of any other designation recovered and sold by a lessee after
the effective date of this section.
§ 5104. Remedy.
(a) Civil action and venue.--A lessor who is party to a
lease may file an action for failure of the lessee to pay the
minimum royalty under section 5103 (relating to minimum royalty)
in the court of common pleas of the county where the land of the
lessor is located or the county in this Commonwealth in which
the lessor resides.
(b) Burden of proof.--
(1) Demonstration by a lessor who is party to a lease
that the lessee has made a royalty payment which is less than
the amount required under section 5103(a) shall create a
presumption that a violation of section 5103 has occurred.
(2) The presumption under paragraph (1) may be rebutted
if the lessee presents clear and convincing evidence that the
required minimum royalty payment was made.
(c) Effect of notice and failure to cure.--In an action in
which a court finds that the lessee who is party to a lease has
violated the terms of section 5103, the lessor shall be entitled
to the remedies under subsections (d) and (e) if, before filing
suit, the lessor gave to the lessee 30 days' written notice by
certified mail of the deficiency and the lessee failed to cure
the deficiency.
(d) Additional remedies.--In addition to actual damages and
any other remedy deemed appropriate by the court, the court
shall award to the lessor reasonable attorney fees and costs in
bringing the action, including expert witness fees.
(e) Treble damages.--If the court finds that the lessee
acted willfully in failing to pay the minimum royalty payment
due or where a lessee has been previously found to have failed
to pay the minimum royalty payment due, the court may award
treble damages to the lessor.
(f) Other remedies not precluded.--The remedies provided
under this section are not exclusive of, do not require
exhaustion of and shall be in addition to any other remedies
provided by the lease, by law or in equity.
§ 5105. Severability.
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The provisions of this chapter are severable. If any
provision of this chapter or its application to any person or
circumstance is held invalid, the invalidity shall not affect
other provisions or applications of this chapter which can be
given effect without the invalid provision or application.
Section 3. The following shall apply retroactively to
October 1, 2017:
(1) The repeal of 58 Pa.C.S. § 2318.
(2) The addition of 58 Pa.C.S. Pt. IV, except for 58
Pa.C.S. §§ 5103 and 5104.
Section 4. This act shall take effect immediately.
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