1Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated
2Statutes, in unconventional gas well fee, further providing
3for expiration of provisions; providing for the taxation of
4natural gas extraction in Pennsylvania; establishing the
5Environmental Purpose and Economic Development Fund; and
6making appropriations.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9Section 1. Section 2318 of Title 58 of the Pennsylvania
10Consolidated Statutes is repealed:

11[§ 2318. Expiration.

12(a) Notice.--The Secretary of the Commonwealth shall, upon
13the imposition of a severance tax on unconventional gas wells in
14this Commonwealth, submit for publication in the Pennsylvania
15Bulletin notice of the imposition.

16(b) Date.--This chapter shall expire on the date of the
17publication of the notice under subsection (a).]

18Section 2. Title 58 is amended by adding a part to read:

19PART IV

20TAXATION

1Chapter

251. Natural Gas Severance Tax

3CHAPTER 51

4NATURAL GAS SEVERENCE TAX

5Sec.

65101. Definitions.

75102. Imposition of tax.

85103. Return and payment.

95104. Use of funds.

10§ 5101. Definitions.

11The following words and phrases when used in this chapter
12shall have the meanings given to them in this section unless the
13context clearly indicates otherwise:

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

15"Natural gas." A fossil fuel consisting of a mixture of
16hydrocarbon gases, primarily methane, possibly including ethane,
17propane, butane, pentane, carbon dioxide, oxygen, nitrogen and
18hydrogen sulfide and other gas species. The term includes
19natural gas from oil fields known as associated gas or casing
20head gas, natural gas fields known as nonassociated gas, coal
21beds, shale beds and other formations. The term does not include
22coal bed methane.

23"Producer." A person who engages or continues within this
24Commonwealth in the business of severing natural gas for sale,
25profit or commercial use. The term does not include a person who
26severs natural gas from a storage field.

27"Producing site." A point of severance capable of producing
28natural gas in paying quantities.

29"Reporting period." A calendar month in which natural gas is
30severed.

1"Secretary." The Secretary of Revenue of the Commonwealth.

2"Sever." To extract or otherwise remove natural gas from the
3soil or water of this Commonwealth.

4"Severance." The extraction or other removal of natural gas
5from the soil or water of this Commonwealth.

6"Severing." Extracting or otherwise removing natural gas
7from the soil or water of this Commonwealth.

8"Unit." A thousand cubic feet of natural gas measured at the
9wellhead at a temperature of 60 degrees Fahrenheit and an
10absolute pressure of 14.73 pounds per square inch in accordance
11with American Gas Association Standards and according to Boyle's
12Law for the measurement of gas under varying pressures with
13deviations as follows:

14(1) The average absolute atmospheric pressure shall be
15assumed to be 14.4 pounds to the square inch, regardless of
16elevation or location of point of delivery above sea level or
17variations in atmospheric pressure from time to time.

18(2) The temperature of the gas passing the meters shall
19be determined by the continuous use of a recording
20thermometer installed to properly record the temperature of
21gas flowing through the meters. The arithmetic average of the
22temperature recorded each 24-hour day shall be used in
23computing gas volumes. If a recording thermometer is not
24installed, or is installed and not operating properly, an
25average flowing temperature of 60 degrees Fahrenheit shall be
26used in computing gas volume.

27(3) The specific gravity of the gas shall be determined
28annually by tests made by the use of an Edwards or Acme
29gravity balance or at intervals as found necessary in
30practice. Specific gravity determinations shall be used in

1computing gas volumes.

2(4) The deviation of the natural gas from Boyle's Law
3shall be determined by annual tests or at other shorter
4intervals as found necessary in practice. The apparatus and
5method used in making the test shall be in accordance with
6recommendations of the National Bureau of Standards or Report
7No. 3 of the Gas Measurement Committee of the American Gas
8Association or amendments to the recommendations or report.
9The results of the tests shall be used in computing the
10volume of gas delivered under this chapter.

11§ 5102. Imposition of tax.

12(a) Establishment.--Beginning July 1, 2014, a natural gas
13severance tax shall be levied on every producer.

14(b) Rate.--The tax shall be imposed at the rate of 5% of the
15gross value of the units severed at the wellhead during a
16reporting period.

17§ 5103. Return and payment.

18(a) Requirement.--Every producer shall file a return with
19the department, on a form prescribed by the department. The
20return shall include all of the following:

21(1) The number of natural gas units severed by the
22producer for the reporting period.

23(2) The number of producing sites used by the producer
24for the severance of natural gas in each county and
25municipality.

26(3) The amount of tax due under section 5102 (relating
27to imposition of tax).

28(b) Filing.--The return required by subsection (a) shall be
29filed with the department within 15 days following the end of a
30reporting period. The first return shall be due August 15, 2014.

1(c) Deadline.--The tax imposed under section 5102 shall be
2due on the day the return is required to be filed and shall
3become delinquent if not remitted to the department by that
4date.

5(d) Fund established.--There is established in the State
6Treasury a fund to be known as the Environmental Purpose and
7Economic Development Fund.

8(e) Deposit.--The tax collected under section 5102 shall be
9deposited into the Environmental Purpose and Economic
10Development Fund.

11§ 5104. Use of funds.

12Funds deposited under section 5103 (relating to return and
13payment) are hereby appropriated as follows:

14(1) The sum of $150,000,000 is hereby appropriated
15annually so that natural gas exploration, drilling and
16production on lands owned by the Commonwealth is not
17necessary.

18(2) For economic development and job creation
19initiatives, the sum of $190,000,000 is hereby appropriated
20for fiscal year 2014-2015, and the sum of $250,000,000 is 
21hereby appropriated for fiscal year 2015-2016 and each fiscal 
22year thereafter.

23(3) The remaining funds are hereby appropriated each
24fiscal year to supplement the amount appropriated under the
25General Appropriation Act for the basic education formula for
26the fiscal year.

27Section 3. This act shall take effect immediately.