WEST virginia legislature
2021 regular session
Introduced
House Bill 2810
By Delegates Anderson and Evans
[Introduced March 01, 2021; Referred to the Committee on Energy and Manufacturing then Finance]
A BILL to amend and reenact §11-13A-3a of the Code of West Virginia, 1931, as amended, relating to the removal of the severance tax on oil and gas produced from low producing oil and natural gas wells below a specific production level.
Be it enacted by the Legislature of West Virginia:
Article 13A. Severance and business privilge tax act.
§11-13A-3a. Imposition of tax on privilege of severing natural gas or oil.
(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 levied and shall be collected from every person
exercising the privilege an annual privilege tax at the
rate and measure provided in subsection (b) of this section: Provided, That
effective for all taxable periods beginning on or after January 1, 2000, there
is an exemption from the imposition of the tax provided 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 5,000 cubic
feet of natural gas per day during the calendar year immediately preceding a
given taxable period; (3) for all taxable periods beginning on or after
January 1, 2021, natural gas produced from any well which produced an average
of less than 15,000 cubic feet of natural gas per day during the calendar year
immediately preceding a given taxable period; (4) 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) (5) for all taxable periods beginning on or after January 1,
2021, oil produced from any well which produced an average of less than two and
one-half barrels of oil per day during the calendar year immediately preceding
a given taxable period; and (6) for a maximum period of 10 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. — The tax imposed in subsection (a) of this section is five percent of the gross value of the natural gas or oil produced by the producer as shown by the gross proceeds derived from the sale thereof by the producer, except as otherwise provided in this article: Provided, That effective for taxable periods beginning on or after January 1, 2020:
(1) For all natural gas produced from any well which produced an average in excess of 60,000 cubic feet of natural gas per day during the calendar year immediately preceding a given taxable year, and for oil produced from any well which produced an average in excess of 10 barrels of oil per day, during the calendar year immediately preceding the beginning date of a given taxable year, the rate of tax is 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;
(2) For all natural gas produced from any well, excluding wells utilizing horizontal drilling techniques targeting shale formations, which produced an average between 5,000 cubic feet of natural gas per day and 60,000 cubic feet of natural gas per day during the calendar year immediately preceding the beginning date of a given taxable year, and for oil produced from any well, excluding wells utilizing horizontal drilling techniques targeting shale formations, which produced an average between one-half barrel per day and 10 barrels per day, during the calendar year immediately preceding the beginning date of a given taxable year, the rate of tax is two and five tenths 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; and
(3) For all natural gas produced from wells utilizing horizontal drilling techniques targeting shale formations, which produced an average between 5,000 cubic feet of natural gas per day and 60,000 cubic feet of natural gas per day during the calendar year immediately preceding the beginning date of a given taxable year, and for oil produced from wells utilizing horizontal drilling techniques targeting shale formations, which produced an average between one-half barrel per day and 10 barrels per day, during the calendar year immediately preceding the beginning date of a given taxable year, the rate of tax is 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.
(c) Tax in addition to other taxes. — The tax imposed by this section applies to all persons severing gas or oil in this state, and is in addition to all other taxes imposed by law.
(d) For purposes of this
section, in determining the average amount of production of gas and oil in any
given calendar year, a taxpayer must calculate the actual production of such
well in the calendar year and divide the same by the number of days the well
was in operation and producing gas or oil in such calendar year.
(e) After the
dedication in §11-13A-5a is made, the remaining proceeds collected from the tax
imposed at the rate prescribed under subdivision (2), subsection (b) of this
section are dedicated to the Oil and Gas Abandoned Well Plugging Fund created
under §22-6-29a of this code: Provided, That if on June 1, 2023, or on
June 1 of any year thereafter, there exists in the Oil and Gas Abandoned Well
Plugging Fund an amount equal to or exceeding the sum of $6 million then the
special rate of tax imposed under subdivision (2), subsection (b) of this
section is reduced to zero for the taxable year beginning on and after the next
succeeding January 1. The Tax Commissioner shall issue an Administrative Notice
by July 1 of each year indicating the balance in the fund as of the immediately
preceding June 1 and the rate of tax on wells pursuant to this subsection
NOTE: The purpose of this bill is to remove the severance tax on oil and gas produced from low producing wells.
Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.