THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY PILEGGI, ERICKSON, RAFFERTY, GREENLEAF, DINNIMAN, McILHINNEY, TARTAGLIONE, TOMLINSON AND BROWNE, JUNE 30, 2011

REFERRED TO FINANCE, JUNE 30, 2011  

AN ACT

Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated

Statutes, imposing a tax on natural gas drilling and using

that tax to reduce taxes on senior citizens.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 58 of the Pennsylvania Consolidated

Statutes is amended by adding chapters to read:

CHAPTER 32

NATURAL GAS DRILLING

Sec.

3201.  Definitions.

3202.  Imposition of tax.

3203.  Administration.

3204.  Penalties.

3205.  Criminal acts.

3206.  Regulations.

3207.  Unauthorized disclosure.

3208.  Account.

§ 3201.  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:

"Account."  The Marcellus Senior Citizens Account established

in section 3208 (relating to account).

"Accredited laboratory."  A facility engaged in the testing

and calibration of scientific measurement devices and certified

by the Department of Environmental Protection as having met the

department's standards for accreditation.

"Base rate."  The rate under section 3202(b) (relating to

imposition of tax).

"Coal bed methane."  Gas which can be produced from coal

beds, coal seams, mined-out areas or gob wells.

"Department."  The Department of Revenue of the Commonwealth.

"Meter."  A device to measure the passage of volumes of gases

or liquids past a certain point.

"Person."  A natural person or a corporation, fiduciary,

association or other entity, including the Commonwealth, its

political subdivisions, instrumentalities and authorities. When

the term is used in a clause prescribing and imposing a penalty

or imposing a fine or imprisonment, or both, the term shall

include the members, as applied to an association, and the

officers, as applied to a corporation.

"Producer."  A person who engages or continues within this

Commonwealth in the business of severing natural gas for sale,

profit or commercial use. The term does not include a person who

severs natural gas from a storage field.

"Reporting period."  A calendar month in which natural gas is

severed.

"Sever."  To extract or otherwise remove natural gas from the

soil or water of this Commonwealth.

"Storage field."  A natural formation or other site that is

used to store natural gas that did not originate from and has

been injected into the formation or site.

"Stripper well."  A producing site or a nonproducing site

that is not capable of producing and does not produce more than

60,000 cubic feet of natural gas per day.

"Unconventional well."  A bore hole drilled or being drilled

for the purpose of or to be used for producing oil or gas from a

geological formation existing below the base of the Elk

Sandstone or its geologic equivalent stratigraphic interval

where oil or gas generally cannot be produced at economic flow

rates or in economic volumes except by vertical or horizontal

well bores stimulated by hydraulic fracture treatments or by

using multilateral well bores or other techniques to expose more

of the formation of the well bore.

"Unit."  A thousand cubic feet of natural gas measured at the

wellhead at a temperature of 60 degrees Fahrenheit and an

absolute pressure of 14.73 pounds per square inch in accordance

with American Gas Association Standards and according to Boyle's

Law for the measurement of gas under varying pressures with

deviations as follows:

(1)  The average absolute atmospheric pressure shall be

assumed to be 14.4 pounds to the square inch, regardless of

elevation or location of point of delivery above sea level or

variations in atmospheric pressure from time to time.

(2)  The temperature of the gas passing the meters shall

be determined by the continuous use of a recording

thermometer installed to properly record the temperature of

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 is 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

annually by tests made by the use of an Edwards or Acme

gravity balance, or at intervals as found necessary in

practice. Specific gravity determinations shall be used in

computing gas volumes.

(4)  The deviation of the natural gas from Boyle's Law

shall be determined by annual tests or at other shorter

intervals as found necessary in practice. The apparatus and

method used in making the test shall be in accordance with

recommendations of the National Bureau of Standards or Report

No. 3 of the Gas Measurement Committee of the American Gas

Association, or amendments thereto. The results of the tests

shall be used in computing the volume of gas delivered under

this chapter.

"Wellhead meter."  A meter placed at a producing or

nonproducing site to measure the volume of natural gas severed

for which a wellhead meter certification has been issued.

§ 3202.  Imposition of tax.

(a)  Establishment.--Beginning January 1, 2012, there shall

be imposed a severance tax on all natural gas from an

unconventional well producing gas in this Commonwealth.

(a.1)  Exemptions.--The tax shall not be imposed on the

following:

(1)  Units provided free of charge to the owner of the

surface under which the gas is severed if the surface owner

is the end user of the gas.

(2)  A stripper well.

(3)  A gas well collecting coal bed methane.

(b)  Rate.--The tax imposed shall be 3% of the gross value of

the units severed at the wellhead of the unconventional well

during a reporting period.

§ 3203.  Administration.

(a)  Registration.--A producer severing natural gas in this

Commonwealth from an unconventional gas well shall, within 30

days of the date of first production, or within 30 days of the

effective date of this act, whichever occurs later, apply for a

certificate of registration in the manner and subject to the

requirements of section 208 of the Tax Reform Code of 1971 to

the extent applicable to the tax imposed by this chapter. An

application shall include a list of unconventional gas wells in

which the producer has an interest and certification of the

accuracy of the sales meter at each well or well pad under

subsection (c).

(b)  Returns, payments and recordkeeping.--A producer subject

to the tax imposed by this chapter shall file monthly returns,

make payments to the department and keep records in the manner

required by sections 215, 216, 217, 218, 219, 220, 221, 222 and

271 of the Tax Reform Code of 1971 to the extent applicable to

the tax imposed by this chapter. Returns shall include

information to update the producer's registration application

submitted under subsection (a) occurring in the month for which

returns are filed relating to:

(1)  The addition or removal of an unconventional gas

well.

(2)  A change in the status of an unconventional gas

well.

(3)  A change in the laboratory used to certify the

accuracy of the wellhead meter.

(c)  Meters.--A producer shall provide and maintain or cause

to be provided and maintained a wellhead meter and a sales meter

for an unconventional gas well that is tested, calibrated and

maintained in accordance with industry standards adopted by the

American Gas Association or other standard adopted by the

department by regulation or, if the sale of gas is to a public

utility, by the Pennsylvania Public Utility Commission. Wellhead

and sales meters shall not be subject to 3 Pa.C.S. Ch. 41

(relating to weights and measures). Multiple wells located on

the same drilling pad may utilize the same meter. A wellhead

meter installed after the effective date of this section shall

be a digital meter.

(d)  Tax Reform Code of 1971.--The provisions of sections

230, 231, 232, 272, 274, 407.3, 407.4, 408 and 408.1 of the Tax

Reform Code of 1971 shall apply, to the extent applicable to the

tax imposed by this chapter, to:

(1)  the assessment, reassessment, enforcement and

collection of the tax; and

(2)  the adoption of regulations by the department

necessary to implement this chapter.

(e)  Interest; additions to tax and penalties; abatement.--

The provisions of sections 266(a) and (b), 267, 268(a) and 269

of the Tax Reform Code of 1971 and sections 806 and 806.1 of the

act of April 9, 1929 (P.L.343, No. 176), known as The Fiscal

Code, shall apply to interest, additions to tax and penalties to

the extent applicable to the tax imposed by this chapter.

(f)  Liens.--The provisions of section 242 of the Tax Reform

Code of 1971 shall apply to liens for the severance tax imposed

by this chapter.

(g)  Service.--The provisions of section 245 of the Tax

Reform Code of 1971 shall apply to service under this chapter.

(h)  Refunds.--The provisions of sections 2703, 2704, 3003.1

and 3003.5 of the Tax Reform Code of 1971 shall apply to

severance tax refunds under this chapter.

§ 3204.  Penalties.

The department shall enforce the following penalties:

(1)  A penalty against a producer for failure to timely

file a return as required under section 3203(b) (relating to

administration). The penalty shall be 5% of the tax liability

to be reported on the return for each day beyond the due date

that the return is not filed.

(2)  In addition to the penalty under paragraph (1), a

penalty against the producer for a willful failure to timely

file a return. The penalty shall be 200% of the tax liability

required to be reported on the return.

§ 3205.  Criminal acts.

(a)  Fraudulent return.--Any person with intent to defraud

the Commonwealth, who willfully makes or causes to be made a

return required by this chapter which is false, is guilty of a

misdemeanor and shall, upon conviction, be sentenced to pay a

fine of not more than $2,000 or to imprisonment for not more

than three years, or both.

(b)  Other crimes.--Except as otherwise provided by

subsection (a), a person is guilty of a misdemeanor and shall,

upon conviction, be sentenced to pay a fine of not more than

$1,000 and costs of prosecution or to imprisonment for not more

than one year, or both, for any of the following:

(1)  Willfully failing to timely remit the tax, penalty

or interest.

(2)  Willfully failing to preserve its books, papers and

records as directed by the department or to permit the

department or its authorized agents to examine its books,

records or papers.

(3)  Knowingly making or providing a person with any

incomplete, false or fraudulent return or report, as to the

payment of the tax imposed under this chapter.

(c)  Other remedies.--Nothing in this section shall restrict,

prohibit or limit the use by the department in collecting taxes

due and payable of another remedy or procedure available at law

or equity for the collection of debts.

§ 3206.  Regulations.

The department shall promulgate regulations necessary to

enforce this chapter.

§ 3207.  Unauthorized disclosure.

Any information gained by the department as a result of any

return, examination, investigation, hearing or verification

required or authorized by this chapter shall be confidential

except for official purposes and except in accordance with

proper judicial order or as otherwise provided by law, and any

person unlawfully divulging the information shall be guilty of a

misdemeanor and shall, upon conviction, be sentenced to pay a

fine of not more than $1,000 and costs of prosecution or to

imprisonment for not more than one year, or both.

§ 3208.  Account.

(a)  Establishment.--The Marcellus Senior Citizens Account is

established as a restricted account within the General Fund.

(b)  Proceeds.--The proceeds of the tax imposed under section

3202 (relating to imposition of tax) and penalties and interest

imposed under this chapter shall be deposited into the account.

(c)  Distributions.--The department shall make the

calculations required for the transfers and distributions under

Chapter 33 (relating to tax relief based on natural gas

drilling) and shall submit the calculations to the State

Treasurer in sufficient time for the State Treasurer to make the

transfers and distributions as required by Chapter 33.

CHAPTER 33

TAX RELIEF BASED ON NATURAL GAS DRILLING

Sec.

3301.  Definitions.

3302.  Distribution.

3303.  Senior citizen tax relief.

§ 3301.  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:

"Account."  The Marcellus Senior Citizens Account established

in section 3208 (relating to account).

"Base payment."  The:

(1)  amount of school property tax levied on the

homestead of an eligible claimant in the base year; or

(2)  amount of school property tax levied on the

homestead of an eligible claimant in the earlier of:

(i)  the calendar year prior to the calendar year for

which an eligible claimant files an application under

this section; or

(ii)  the calendar year prior to the series of

consecutive calendar years for which an eligible claimant

has filed applications under this section and during

which the claimant has maintained continuous eligibility.

"Base year."  The earlier of:

(1)  the calendar year prior to the calendar year for

which an eligible claimant files an application under this

section; or

(2)  the calendar year prior to the series of consecutive

calendar years for which an eligible claimant has filed

applications under this section and during which the claimant

has maintained continuous eligibility.

"Department."  The Department of Education of the

Commonwealth.

"Eligible claimant."  An individual who meets all of the

following for the base year and each succeeding year up to and

including the year for which the freeze is sought:

(1)  Was at least 65 years of age or has a spouse who is

a member of the household, who was at least 65 years of age

during the base year.

(2)  Has held a homestead exemption for the previous five

years.

(3)  Has paid the full amount of property taxes that were

due for each succeeding year up to and including the year for

which the freeze is sought.

"School property tax."  The real property tax levied by a

school district on the homestead of an eligible claimant. The

term does not include penalties, interest or payments made in

lieu of taxes.

"School property tax increase."  The amount of increase in

school property tax levied on the homestead of an eligible

claimant in a calendar year compared to the school property tax

levied on the homestead of the eligible claimant in the base

year.

§ 3302.  Distribution.

For fiscal year 2012-2013 through fiscal year 2017-2018, the

department shall distribute the amount deposited in the account

in accordance with section 3303 (relating to senior citizen tax

relief).

§ 3303.  Senior citizen tax relief.

(a)  Tax freeze.--Notwithstanding any other law, an eligible

claimant who meets the eligibility requirements in this section

shall be entitled to a freeze of school property taxes and shall

not be required to pay any increases in those school property

taxes in excess of the claimant's base payment.

(b)  Application.--An eligible claimant may apply for the tax

freeze under subsection (a) by filing the following with the

school district imposing the school property tax on a form

prescribed by the department:

(1)  A request for the tax freeze and a copy of the most

recent school property tax bill.

(2)  Certification that the claimant or the claimant's

spouse is the owner of the homestead upon which the real

property taxes are imposed.

(3)  Evidence that the claimant is one of the following:

(i)  An individual who was at least 65 years of age

during a calendar year in which school property taxes

were due and payable.

(ii)  An individual who was a widow or widower and

was at least 65 years of age during a calendar year or

part of the calender year in which school property taxes

were due and payable.

(4)  Receipts showing prompt payment of the current

year's school property tax liability.

(c)  Timing.--

(1)  The initial application under subsection (b) must be

filed within 45 days prior to the end of the school

district's fiscal year.

(2)  Within 15 days of receipt of an application, the

political subdivision shall determine the claimant to be

eligible or ineligible. If the political subdivision fails to

determine if the claimant is eligible or ineligible within 15

days of receipt of an application, the claimant shall be

deemed eligible.

(d)  Renewal.--The school district may require an annual

renewal form to be submitted no later than 45 days prior to the

end of the school district's fiscal year.

(e)  Termination.--

(1)  Subject to paragraph (2), the tax rate on and the

assessment of any school property taxes shall become current

on the sale or transfer of that real property, including any

transfer under a recorded real property sales contract.

(2)  A tax freeze under this section shall remain in

effect upon the transfer of the affected real property to a

surviving spouse if at the time of the death of the claimant,

the surviving spouse is at least 65 years of age or will be

65 years of age within six months of the date of death of the

claimant.

(f)  Commonwealth payment.--

(1)  In fiscal year 2012-2013 through 2017-2018, the

department shall pay to school districts the amount of each

eligible claimant's increase in school property taxes in

excess of the claimant's base payment.

(2)  The school district shall provide notification and

documentation to the department of the total balance due to

the local taxing authorities for increases in school property

taxes.

(3)  The department shall certify the total amount due to

increase in school property taxes for each school district.

Section 2.  This act shall take effect immediately.