COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 216
(By Senators Tomblin, Mr. President, and Caruth,
By Request of the Executive)
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[Originating in the Committee on Energy, Industry and Mining;
reported February 14, 2008.]
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A BILL to amend and reenact §11-13A-3d and §11-13A-20a of the Code
of West Virginia, 1931, as amended; to amend said code by
adding thereto a new section, designated §11-13V-4a; and to
amend and reenact §31-15A-16 of said code, all relating to
equalization of natural gas and coalbed methane taxation;
terminating the severance and business privilege tax exemption
for production of coalbed methane with certain limited
exceptions; specifying that coalbed methane is taxed as
natural gas for purposes of the Severance and Business
Privilege Tax Act and the Workers' Compensation Debt Reduction
Act with limited exceptions; authorizing Tax Commissioner to
promulgate rules; requiring portion of tax be used for
infrastructure projects; providing that seventy-five percent of dedicated funds be used in counties producing coalbed
methane; providing that remaining twenty-five percent of
dedicated funds be shared equally by counties not producing
coalbed methane; and providing effective dates.
Be it enacted by the Legislature of West Virginia:
That §11-13A-3d and §11-13A-20a of the Code of West Virginia,
1931, as amended, be amended and reenacted; that said code be
amended by adding thereto a new section, designated §11-13V-4a; and
that §31-15A-16 of said code be amended and reenacted, all to read
as follows:
ARTICLE 13A. SEVERANCE AND BUSINESS PRIVILEGE TAX ACT.
§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 two thousand eight, subject to the provisions of
subsection (f) of this section.
(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.
(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.
(f) Notwithstanding any other provision of this code to the
contrary, on and after the first day of January, two thousand
eight, the exemption from the tax on the privilege of severing
coalbed methane created in this section will no longer be
applicable except as follows:
(1) The privilege tax shall not be collected on coalbed
methane produced from any coalbed methane well for the remainder of
the five year exemption for any well that was placed in service
before the first day of January, two thousand eight.
(2) The privilege tax shall not be collected on coalbed
methane produced from any coalbed methane well for a period of five years for any well where an application for a permit to drill
a coalbed methane well was submitted to the Department of
Environmental Protection before the thirtieth day of June, two
thousand eight.
(g) Subject to the exceptions set forth in this section and
article thirteen-v of this chapter, on and after the first day of
January, two-thousand eight, coalbed methane and methane produced
from or by a coalbed methane well is taxable as natural gas for
purposes of the taxes imposed by this article and the taxes imposed
by article thirteen-v of this chapter.
(h) The Tax Commissioner shall promulgate emergency and
legislative rules, in accordance with the provisions of article
three, chapter twenty-nine-a of this code, as necessary to
effectuate the purposes of this article.
§11-13A-20a. Dedication of tax.
(a) The amount of taxes collected under this article from
providers of health care items or services, including any interest,
additions to tax and penalties collected under article ten of this
chapter, less the amount of allowable refunds and any interest
payable with respect to such refunds, shall be deposited into the
Special Revenue Fund created in the State Treasurer's Office and
known as the Medicaid State Share Fund. Said fund shall have
separate accounting for those health care providers as set forth in
articles four-b and four-c, chapter nine of this code.
(b) Notwithstanding the provisions of subsection (a) of this
section, for the remainder of fiscal year one thousand nine hundred ninety-three and for each succeeding fiscal year, no expenditures
from taxes collected from providers of health care items or
services are authorized except in accordance with appropriations by
the Legislature.
(c) The amount of taxes on the privilege of severing timber
collected under section three-b of this article, including any
interest, additions to tax and penalties collected under article
ten of this chapter, less the amount of allowable refunds and any
interest payable with respect to such refunds, shall be paid into
a special revenue account in the State Treasury to be appropriated
by the Legislature for purposes of the Division of Forestry.
(d) Notwithstanding any other provision of this code to the
contrary, beginning the first day of January, two thousand nine,
there is hereby dedicated an annual amount not to exceed four
million dollars from annual collections of the tax imposed by
section three-d of this article to be deposited into the West
Virginia Infrastructure Fund, created in section nine, article
fifteen-a, chapter thirty-one of this code.
(e) Beginning with the fiscal year ending the thirtieth day of
June two thousand nine and each fiscal year thereafter, the Tax
Commissioner shall pay from the taxes imposed in section three-d of
this article, on the first day of October of each year, into the
West Virginia Infrastructure Fund, an amount not to exceed four
million dollars per fiscal year. Prior to making any such payment
the commissioner shall deduct the amount of refunds lawfully paid
and administrative costs authorized by this code.
(f) The Tax Commissioner shall provide to the West Virginia
Infrastructure and Jobs Development Council a breakdown of coalbed
methane taxes paid and amount of coalbed methane produced by
county. The commissioner may obtain any production or other
necessary information not currently reported to the commissioner
from the owners or operators of coalbed methane wells or from the
Department of Environmental Protection or both.
ARTICLE 13V. WORKERS' COMPENSATION DEBT REDUCTION ACT.
§11-13V-4a. Coalbed methane.
(a) Subject to the exceptions set forth in this section, on
and after the first day of January, two thousand eight, coalbed
methane and methane produced from or by a coalbed methane well is
taxable as natural gas for purposes of the taxes imposed by this
article. All coalbed methane produced from any coalbed methane
well placed in service before the first day of January, two
thousand eight shall be exempt from the taxes imposed by this
article for the remainder of the five year original exemption
period set forth in section three-d, article thirteen-a of this
chapter and applicable to the coalbed methane produced from that
well. All coalbed methane produced from any coalbed methane well
where an application for a permit to drill a coalbed methane well
was submitted to the Department of Environmental Protection before
the thirtieth day of June, two thousand eight shall be exempt from
the taxes imposed by this article for the five year exemption
period set forth in section three-d, article thirteen-a of this
chapter.
(b) 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.
ARTICLE 15A. WEST VIRGINIA INFRASTRUCTURE AND JOBS DEVELOPMENT
COUNCIL.
§31-15A-16. Dedication of severance tax proceeds.
(a) There shall be dedicated an annual amount from the
collections of the tax collected pursuant to article thirteen-a,
chapter eleven of this code for the construction, extension,
expansion, rehabilitation, repair and improvement of water supply
and sewage treatment systems and for the acquisition, preparation,
construction and improvement of sites for economic development in
this state as provided in this article.
(b) Notwithstanding any other provision of this code to the
contrary, beginning on the first day of July, one thousand nine
hundred ninety-five, the first sixteen million dollars of the tax
collected pursuant to article thirteen-a, chapter eleven of this
code shall be deposited to the credit of the West Virginia
infrastructure general obligation debt service fund created
pursuant to section three, article fifteen-b of this chapter:
Provided, That beginning on the first day of July, one thousand
nine hundred ninety-eight, the first twenty-four million dollars of
the tax annually collected pursuant to article thirteen-a of this
code shall be deposited to the credit of the West Virginia
infrastructure general obligation debt service fund created
pursuant to section three, article fifteen-b of this chapter.
(c) Notwithstanding any provision of subsection (b) of this
section to the contrary: (1) None of the collections from the tax
imposed pursuant to section six, article thirteen-a, chapter eleven
of this code shall be so dedicated or deposited; and (2) the
portion of the tax imposed by article thirteen-a, chapter eleven
and dedicated for purposes of medicaid and the division of forestry
pursuant to section twenty-a of said article thirteen-a shall
remain dedicated for the purposes set forth in said section
twenty-a.
(d) On or before the first day of May of each year, commencing
the first day of May, one thousand nine hundred ninety-five, the
council, by resolution, shall certify to the treasurer and the
water development authority the principal and interest coverage
ratio and amount for the following fiscal year on any
infrastructure general obligation bonds issued pursuant to the
provisions of article fifteen-b of this chapter.
(e) Notwithstanding any provision of this article to the
contrary, the tax on coalbed methane remitted by the Tax
Commissioner for deposit in the West Virginia Infrastructure Fund
shall be distributed as follows: (i) seventy-five percent of the
moneys so deposited shall be distributed for infrastructure
projects in the various counties of this state in which the coalbed
methane was produced and (ii) the remaining twenty-five percent of
the moneys so deposited shall be distributed equally in the various
counties of this state in which no coalbed methane was produced for
infrastructure projects. Moneys shall be distributed to each coalbed methane producing county in direct proportion to the amount
of tax paid using information provided by the Tax Commissioner as
required in section twenty-a, article thirteen-a, chapter eleven
of this code.
NOTE: The purpose of this bill is to make the taxation of
natural gas and coalbed methane equal and uniform, to dedicate
certain amounts of tax revenue to the West Virginia Infrastructure
Fund, and to grandfather certain entitlements to the exemption
previously applicable to coalbed methane production.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
Section 11-13V-4a is new; therefore, strike-throughs and
underscoring have been omitted.