PRINTER'S NO. 602

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

526

Session of

2015

INTRODUCED BY CONKLIN, COHEN, D. COSTA, HARKINS, MURT AND

THOMAS, FEBRUARY 23, 2015

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY,

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Part II of Title 58 of the Pennsylvania

Consolidated Statutes is amended by adding a chapter to read:

Sec.

2901. Definitions.

2902. Imposition of natural gas severance fee.

2903. (Reserved).

2910. Reassessments.

2911. Interest.

2912. Penalties.

2913. Criminal acts.

2914. Abatement of additions or penalties.

2915. Bulk and auction sales.

2916. Collection upon failure to request reassessment, review

or appeal.

2917. Tax liens.

2918. Tax suit reciprocity.

2919. Service.

2926. Cooperation with other governments.

2927. Bonds.

2928. Natural Gas Severance Fee Account established.

2929. Distributions.

§ 2901. 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 Natural Gas Severance Fee Account established

in section 2928 (relating to Natural Gas Severance Fee Account

by the Department of Environmental Protection as having met its

standards for accreditation.

"Association." A partnership, limited partnership or any

other form of unincorporated enterprise owned or conducted by

two or more persons.

"Average annual price of natural gas." The arithmetic mean

of the New York Mercantile Exchange (NYMEX) Henry Hub settled

price on the last trading day of each month of a calendar year

as reported by the Wall Street Journal for the 12-month period

ending March 31.

"Base fee." The fee under section 2902 (relating to

States, this Commonwealth or any other state, territory or

foreign country or dependency.

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

"Fee." The fee imposed under this chapter.

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

or liquids past a certain point.

"Municipality." A city, borough, incorporated town or

township.

"Natural gas." A fossil fuel consisting of a mixture of

hydrocarbon gases, primarily methane, possibly including ethane,

head gas, natural gas fields known as nonassociated gas, coal

beds, shale beds and other formations. The term does not include

coal bed methane.

"Nonproducing site." A point of severance that is not

capable of producing natural gas in paying quantities.

"Paying quantities." Profit to the producer, however small,

over the producer's current operating expenses.

"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

severs natural gas from a storage field.

"Producing site." A point of severance capable of producing

natural gas in paying quantities.

"Reporting period." Every three successive calendar months

beginning January 1, 2016.

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

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

soil or water of this Commonwealth.

"Severance." The extraction or other removal of the natural

gas commodity from the soil or water of this Commonwealth to be

to consumers outside 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

90,000 cubic feet of natural gas per day.

"Taxpayer." A person subject to the fee imposed by this

chapter.

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

wellhead at a temperature of 60 degrees Fahrenheit and an

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

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

meter.

§ 2902. Imposition of natural gas severance fee.

(a) Establishment.--Beginning January 1, 2016, there shall

be levied a natural gas severance fee on every producer. The fee

shall not be imposed on units severed from a stripper well

unless:

(1) The stripper well is one of multiple producing sites

or nonproducing sites, the combined volumes of gas produced

by all of which sites are measured by a single wellhead meter

as provided in section 2906 (relating to meters).

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

following:

(1) Units severed by a producer and sold and delivered

to a manufacturer of tangible personal property, as defined

in section 201(m) of the act of March 4, 1971 (P.L.6, No.2),

known as the Tax Reform Code of 1971, for the manufacturer's

use within this Commonwealth if the units have been severed

from one or more producing sites or nonproducing sites on

property owned by the manufacturer.

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

surface under which the gas is severed if the surface owner

due under mineral leases, and the producer shall not recover any

portion of the fee paid from the royalty owner through other

means of deduction or reallocation, notwithstanding any

provision in the lease, contract or agreement.

§ 2903. (Reserved).

§ 2904. Return and payment.

(a) Return.--A producer shall submit a return and payment of

the fee to the department on a form prescribed by the department

for each reporting period. The return shall include the

following:

county and municipality.

(3) The amount due for the reporting period.

(b) Filing.--The return required under subsection (a) shall

be filed with the department within 25 days following the end of

a reporting period.

(c) Deadline.--The fee imposed under section 2902 (relating

to imposition of natural gas severance fee) is due on the day

the return is required to be filed and becomes delinquent if not

remitted to the department by that date.

(d) Deposit.--Except as set forth in subsection (e), all

fees collected under this chapter shall be deposited into the

(a) Application.--Before a producer severs natural gas in

this Commonwealth, the producer shall apply to the department

for a natural gas severance fee registration certificate.

(a.1) Application fee.--The department may charge an

application fee to cover the administrative costs associated

with the application and registration process. If the department

charges an application fee, the department shall not issue a

registration certificate until the producer has paid the

application fee.

(a.2) Declaration.--The producer shall include in its

meter certifications for each site. The producer shall update

the declaration when the producer adds or removes a producing

site or nonproducing site in this Commonwealth or when there is

a change in the status of a producing site or nonproducing site

or when the producer uses a different accredited laboratory to

issue a wellhead meter certification. The producer shall update

the declaration within 30 days after a calendar month in which a

change to the declaration occurs.

(b) Issuance.--Except as provided under subsection (c),

after the receipt of an application, the department shall issue

a registration certificate under subsection (a). The

(c) Refusal, suspension or revocation.--The department may

refuse to issue, suspend or revoke a registration certificate if

the applicant or registrant has not filed required State tax

reports and paid State taxes not subject to a timely perfected

administrative or judicial appeal or subject to a duly

authorized deferred payment plan. The department shall notify

the applicant or registrant of any refusal, suspension or

revocation. The notice shall contain a statement that the

refusal, suspension or revocation may be made public. The notice

shall be made by first class mail. An applicant or registrant

petition for review; or

(ii) the expiration of the board's time for acting

upon the petition.

(4) In all cases of judicial sales, receiverships,

assignments or bankruptcies.

(b) Prohibition.--In a case for the collection of fees under

subsection (a), the taxpayer against whom they were assessed

shall not be permitted to set up a ground of defense that might

have been determined by the department, the Board of Finance and

Revenue or the courts, provided that the defense of failure of

the department to mail notice of assessment or reassessment to

liable under this chapter after demand, the amount, including

interest, addition or penalty, together with additional costs

that may accrue, shall be a lien in favor of the Commonwealth

upon the real and personal property of the taxpayer but only

after the same has been entered and docketed of record by the

prothonotary of the county where the property is situated. The

department may, at any time, transmit to the prothonotaries of

the respective counties certified copies of all liens imposed by

this section. It shall be the duty of the prothonotary receiving

the lien to enter and docket the same of record to the office of

entry.

(b) Priority of lien and effect on judicial sale.--Except

for the costs of the sale and the writ upon which the sale was

made and real estate taxes and municipal claims against the

property, a lien imposed under this section shall have priority

from the date of its recording and shall be fully paid and

satisfied out of the proceeds of any judicial sale of property

subject to the lien, before any other obligation, judgment,

claim, lien or estate to which the property may subsequently

become subject, but shall be subordinate to mortgages and other

liens existing and duly recorded or entered of record prior to

are applied to its payment, and the lien shall continue in full

force and effect as to the balance remaining unpaid. There shall

be no inquisition or condemnation upon any judicial sale of real

estate made by the Commonwealth under the provisions of this

chapter. The lien shall continue as provided in the act of April

9, 1929 (P.L.343, No.176), known as The Fiscal Code, and a writ

of execution may directly issue upon the lien without the

issuance and prosecution to judgment of a writ of scire facias,

provided that not less than 10 days before issuance of any

execution on the lien, notice of the filing and the effect of

merchandise regularly sold or leased in the ordinary course of

business by the taxpayer against whom the lien has been entered,

unless and until a writ of execution has been issued and a levy

made upon the stock of goods, wares and merchandise.

(d) Duty of prothonotary.--Any willful failure of any

prothonotary to carry out any duty imposed upon the prothonotary

by this section shall be a misdemeanor. Upon conviction, the

offender shall 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.

(e) Priority.--Except as provided in this chapter, the

distribution in priority to all other claims and liens, except

as the laws of the United States may give priority to a claim to

the Federal Government. A person charged with the administration

or distribution of the property or estate who violates the

provisions of this section shall be personally liable for the

taxes imposed by this chapter which are accrued and unpaid and

chargeable against the person whose property or estate is being

administered or distributed.

(f) Other remedies.--Subject to the limitations contained in

this chapter as to the assessment of fees, nothing contained in

collection of debts.

§ 2918. Tax suit reciprocity.

The courts of this Commonwealth shall recognize and enforce

liabilities for natural gas severance or extraction fees

lawfully imposed by any other state, provided that the other

state recognizes and enforces the fee imposed under this

chapter.

§ 2919. Service.

A producer is deemed to have appointed the Secretary of the

Commonwealth its agent for the acceptance of service of process

or notice in a proceeding for the enforcement of the civil

the Commonwealth. In that case, a copy of the process or notice

shall be personally served upon any agent or representative of

the producer who may be found within this Commonwealth, or,

where no agent or representative may be found, a copy of the

process or notice shall be sent via registered mail to the

producer at the last known address of its principal place of

business, home office or residence.

§ 2920. Refunds.

Under Article XXVII of the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971, the department

made to the person or the person's heirs, successors, assigns or

other personal representatives who paid the fee, provided that

no refund shall be made under this section regarding a payment

made by reason of an assessment where a taxpayer has filed a

petition for reassessment under section 2702 of the Tax Reform

Code of 1971 to the extent the petition is adverse to the

taxpayer by a decision which is no longer subject to further

review or appeal. Nothing in this chapter shall prohibit a

taxpayer who has filed a timely petition for reassessment from

amending it to a petition for refund where the petitioner paid

the fee assessed.

(P.L.6, No.2), known as the Tax Reform Code of 1971, within the

time limits of section 3003.1 of the Tax Reform Code of 1971.

(b) Natural gas severance fee.--A refund or credit of fees,

interest or penalty paid as a result of an assessment made by

the department under section 2905 (relating to natural gas

severance fee registration) shall be made only where the person

who has paid the fee files with the department a petition for a

refund with the department under Article XXVII of the Tax Reform

Code of 1971 within the time limits of section 3003.1 of the Tax

Reform Code of 1971. The filing of a petition for refund, under

assessment.

§ 2922. Rules and regulations.

The department is charged with the enforcement of the

provisions of this chapter and is authorized and empowered to

prescribe, adopt, promulgate and enforce rules and regulations

not inconsistent with the provisions of this chapter relating to

any matter or thing pertaining to the administration and

enforcement of the provisions of this chapter and the collection

of fees, penalties and interest imposed by this chapter. The

department may prescribe the extent, if any, to which any of the

rules and regulations shall be applied without retroactive

regulations as the department may prescribe regarding matters

pertinent to the person's business. Whenever it is necessary,

the department may require a person, by notice served upon the

person or by regulations, to make returns, render statements or

keep records as the department deems sufficient to show whether

or not a person is liable to pay fees under this chapter.

(a.1) Records.--Records to be maintained are:

(1) Wellhead meter charts for each reporting period and

the meter calibration and maintenance records. If turbine

meters are in use, the maintenance records will be made

sale, transport or delivery of natural gas.

(3) Records, statements and other instruments as the

department may prescribe by regulation.

(b) Records of nonresidents.--A nonresident who does

business in this Commonwealth as a producer shall keep adequate

records of the business and of the fee due as a result. The

records shall be retained within this Commonwealth unless

retention outside this Commonwealth is authorized by the

department. The department may require a taxpayer who desires to

retain records outside this Commonwealth to assume reasonable

out-of-State audit expenses.

keep separate books and records, the person shall be liable for

a penalty equaling 100% of fees due under this chapter for the

period where separate records were not maintained.

§ 2924. Examinations.

The department or any of its authorized agents are authorized

to examine the books, papers and records of any taxpayer in

order to verify the accuracy and completeness of any return made

or, if no return was made, to ascertain and assess the fee

imposed by this chapter. The department may require the

preservation of all books, papers and records for any period

facilities and opportunity for examinations and investigations

under this section. The department is further authorized to

examine any person, under oath, concerning the taxable severing

of natural gas by any taxpayer or concerning any other matter

relating to the enforcement or administration of this chapter

and, to this end, may compel the production of books, papers and

records and the attendance of all persons whether as parties or

witnesses whom it believes to have knowledge of relevant

matters. The procedure for the hearings or examinations shall be

the same as that provided by the act of April 9, 1929 (P.L.343,

No.176), known as The Fiscal Code.

person unlawfully divulging the information commits 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.

§ 2926. Cooperation with other governments.

Notwithstanding the provisions of section 2918 (relating to

tax suit reciprocity), the department may permit the

Commissioner of the Internal Revenue Service of the United

States, the proper officer of any state or the authorized

representative of either of them to inspect the returns of any

concerning any item contained in any return or disclosed by the

report of any examination or investigation of the return of any

taxpayer. This permission shall be granted only if the laws of

the United States or another state grant substantially similar

privileges to the proper officer of the Commonwealth charged

with the administration of this chapter.

§ 2927. Bonds.

(a) Taxpayer to file bond.--The department may require a

nonresident natural person or any foreign corporation,

association, fiduciary or other entity, not authorized to do

business within this Commonwealth or not having an established

penalties due or which may become due from a nonresident natural

person, corporation, association, fiduciary or other entity

whenever it deems it necessary to protect the revenues obtained

under this chapter. The department may also require a bond of a

person petitioning the department for reassessment in the case

of any assessment over $500 or where, in its opinion, the

ultimate collection is in jeopardy. For a period of three years,

the department may require a bond of any person who has, on

three or more occasions within a 12-month period, either filed a

return or made payment to the department more than 30 days late.

within five days after notice is given by the department unless,

within five days, the taxpayer shall request in writing a

hearing before the secretary or the secretary's representative.

At the hearing, the necessity, propriety and amount of the bond

shall be determined by the secretary or the secretary's

representative. The determination shall be final and the

taxpayer shall comply with it within 15 days after notice is

mailed to the taxpayer.

(b) Securities in lieu of bond.--In lieu of the bond

required by this section, securities approved by the department

or cash in a prescribed amount may be deposited. The securities

(c) Failure to file bond.--The department may file a lien

under section 2917 (relating to tax liens) against any taxpayer

who fails to file a bond when required to do so under this

section. All funds received upon execution of the judgment on

the lien shall be refunded to the taxpayer with 3% interest,

should a final determination be made that it does not owe any

payment to the department.

§ 2928. Natural Gas Severance Fee Account established.

(a) Establishment.--The Natural Gas Severance Fee Account is

established as a restricted account within the General Fund.