ENGROSSED
Senate Bill No. 684
(By Senators Bailey, Bowman, Unger and Boley)
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[Introduced March 21, 2005; referred to the Committee
on Finance.]
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A BILL to amend and reenact §11-13A-3a and §11-13A-3d of the Code
of West Virginia, 1931, as amended, all relating to the
reduction from five percent to three percent in the severance
tax imposed on natural gas produced from wells placed in
service on or after the first day of December, two thousand
five; eliminating the five-year severance tax exemption for
coalbed methane produced from wells placed in service on or
after the first day of December, two thousand five; and
reducing from five percent to three percent the severance tax
on gas produced from coalbed methane wells drilled on or after
the first day of December, two thousand five.
Be it enacted by the Legislature of West Virginia:
That §11-13A-3a and §11-13A-3d of the Code of West Virginia,
1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 13A. SEVERANCE TAXES.
§11-13A-3a. Imposition of tax on privilege of severing natural
gas or oil; Tax Commissioner to develop a uniform
reporting form.
(a)
Imposition of tax. -- For the privilege of engaging or
continuing within this state in the business of severing natural
gas or oil for sale, profit or commercial use, there is hereby
levied and shall be collected from every person exercising such
privilege an annual privilege tax:
Provided, That effective for
all taxable periods beginning on or after the first day of January,
two thousand, there is an exemption from the imposition of the tax
provided
for in this article on the following: (1) Free natural
gas provided to any surface owner; (2) natural gas produced from
any well which produced an average of less than five thousand cubic
feet of natural gas per day during the calendar year immediately
preceding a given taxable period; (3) oil produced from any oil
well which produced an average of less than one-half barrel of oil
per day during the calendar year immediately preceding a given
taxable period; and (4) for a maximum period of ten years, all
natural gas or oil produced from any well which has not produced
marketable quantities of natural gas or oil for five consecutive
years immediately preceding the year in which a well is placed back
into production and thereafter produces marketable quantities of
natural gas or oil.
(b)
Rate and measure of tax. --
(1) The tax imposed in subsection (a) of this section shall be
five percent of the gross value of the natural gas or oil produced,
as shown by the gross proceeds derived from the sale thereof by the
producer, except as otherwise provided in this article.
(2) With respect to natural gas produced from wells placed in
service on or before the thirtieth day of November, two thousand
five, the tax imposed in subsection (a) of this section shall be
five percent of the gross proceeds derived from the sale thereof by
the producer, except as otherwise provided in this article.
(3) With respect to natural gas produced from wells placed in
service on or after the first day of December, two thousand five,
the tax imposed in subsection (a) of this section shall be three
percent of the gross value of the natural gas produced, as shown by
the gross proceeds derived from the sale thereof by the producer,
except as otherwise provided in this article.
(c)
Tax in addition to other taxes. -- The tax imposed by this
section shall apply to all persons severing gas or oil in this
state, and shall be in addition to all other taxes imposed by law.
(d) (1) The Legislature finds that in addition to the
production reports and financial records which must be filed by oil
and gas producers with the State Tax Commissioner in order to
comply with this section, oil and gas producers are required to
file other production reports with other agencies, including, but
not limited to, the office of oil and gas, the Public Service
Commission and county assessors. The reports required to be filed are largely duplicative, the compiling of the information in
different formats is unnecessarily time consuming and costly, and
the filing of one report or the sharing of information by agencies
of government would reduce the cost of compliance for oil and gas
producers.
(2) On or before the first day of July, two thousand three,
the Tax Commissioner shall design a common form that may be used
for each of the reports regarding production that are required to
be filed by oil and gas producers, which form shall readily permit
a filing without financial information when such information is
unnecessary. The Commissioner shall also design such forms so as
to permit filings in different formats, including, but not limited
to, electronic formats.
§11-13A-3d. Imposition of tax on privilege of severing coalbed
methane.
(a) The Legislature hereby finds and declares the following:
(1) That coalbed methane is underdeveloped and an
under-utilized resource within this state which, where practicable,
should be captured and not be vented or wasted;
(2) The health and safety of persons engaged in coal mining is
a paramount concern to the state. The Legislature intends to
preserve coal seams for future safe mining, to facilitate the
expeditious, safe evacuation of coalbed methane from the coalbeds
of this state, and to ensure the safety of miners by encouraging
the advance removal of coalbed methane;
(3) The United States Environmental Protection Agency's
Coalbed Methane Outreach Program encourages
United States coal
mines in the United States to remove and use methane that is
otherwise wasted during mining. These projects have important
economic benefits for the mines and their local economies while
they also reduce emissions of methane; and
(4) The initial costs of development of coalbed methane wells
can be large in comparison to conventional wells and deoxygenation
and water removal increase development expenditures.
The Legislature, therefore, concludes that an incentive to
coalbed methane development should be implemented to encourage
capture of methane gas that would otherwise be vented to the
atmosphere.
(b)
Imposition of tax. -- In lieu of the annual privilege tax
imposed on the severance of natural gas or oil pursuant to section
three-a, article thirteen-a, for the privilege of engaging or
continuing within this state in the business of severing coalbed
methane for sale, profit or commercial use, there is hereby levied
and shall be collected from every person exercising such privilege
an annual privilege tax:
Provided, That effective for taxable
years beginning on or after the first day of January, two thousand
one, there is an exemption from the imposition of the tax provided
for in this article for a maximum period of five years for all
coalbed methane produced from any coalbed methane well placed in
service after the first day of January, two thousand. For purposes of this section, the terms "coalbed methane" and "coalbed methane
well" have the meaning ascribed to them in section two, article
twenty-one, chapter twenty-two of this code. The exemption from
tax provided by this section is applicable to any coalbed methane
well placed in service before the first day of
January, two
thousand eleven December, two thousand five.
(c)
Rate and measure of tax. -- The tax imposed on subsection
(b) of this section is five percent of the gross value of the
coalbed methane produced, as shown by the gross proceeds derived
from the sale thereof by the producer, except as otherwise provided
in this article:
Provided, That the tax imposed in subsection (b)
of this section shall be three percent of the gross value of the
coalbed methane gas produced from wells placed in service on or
after the first day of December, two thousand five, as shown by the
gross proceeds derived from the sale thereof by the producer,
except as otherwise provided in this article.
(d)
Tax in addition to other taxes. -- The tax imposed by this
section applies to all persons severing coalbed methane in this
state, and is in addition to all other taxes imposed by law.
(e) Except as specifically provided in this section,
application of the provisions of this article apply to coalbed
methane in the same manner and with like effect as the provisions
apply to natural gas.
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