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Introduced Version House Bill 3358 History

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HB ORIG 1 LINE
H. B. 3358


(By Delegates Michael, Cann, Kominar, Williams, Stalnaker, Palumbo, Boggs, Houston, Proudfoot, Anderson and Evans)



(Originating in the Committee on Finance)


[March 25, 2005]


H. B. 3358- "A Bill to amend and reenact §11-13A-3a, §11-13A-3b and §11-13A-3d of the Code of West Virginia, 1931, as amended, all relating to the reduction from five percent to four percent in the severance tax imposed on natural gas produced from wells placed in service on or after the first day of July, two thousand five; the reduction from three and twenty-two hundredths percent to one and twenty-two hundredths percent in the severance tax imposed on timber produced on or after the first day of December, two thousand five; reducing the period of availability of a certain five-year severance tax exemption for coalbed methane production; and reducing from five percent to four percent the severance tax on gas produced from coalbed methane wells on or after the first day of July, two thousand five.

Be it enacted by the Legislature of West Virginia:
That §11-13A-3a, §11-13A-3b 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 June, two thousand five, the tax imposed in subsection (a) of this section shall be five 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.
(3) With respect to natural gas produced from wells placed in service on or after the first day of July, two thousand five, the tax imposed in subsection (a) of this section shall be four 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-3b. Imposition of tax on privilege of severing timber.
(a) Imposition of tax. -- For the privilege of engaging or continuing within this state in the business of severing timber for sale, profit or commercial use, there is hereby levied and shall be collected from every person exercising such privilege an annual privilege tax.
(b) Rate and measure of tax. -- The tax imposed in subsection (a) of this section shall be three and twenty-two hundredths percent of the gross value of the timber 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 (a) of this section on timber produced on or after the first day of December, two thousand five, shall be one and twenty-two hundredths percent of the gross value of the timber 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 timber in this state, and shall be in addition to all other taxes imposed by law.
(d) Effective date. -- This section, as amended in the year one thousand nine hundred ninety-three, shall apply to gross proceeds derived after the thirty-first day of May of such year. The language of section three of this article, as in effect on the first day of January of such year, shall apply to gross proceeds derived prior to the first day of June of such year and, with respect to such gross income, shall be fully and completely preserved.
§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 July, 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 for tax years beginning on or after the first day of January, two thousand five, the tax imposed in subsection (b) of this section is four percent of the gross value of the coalbed methane gas produced on or after the first day of July, 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.
NOTE: The purpose of this bill is to reduce the severance tax rate on natural gas from five percent to four percent for wells drilled on or after July 1, 2005; to reduce the severance tax rate on timber from three and twenty-two hundredths percent to one and twenty-two hundredths percent on December 1, 2005; to remove the five-year severance tax exemption for coalbed methane wells drilled on or after July 1, 2005; and to reduce the severance tax rate on gas produced from coalbed methane wells on or after July 1, 2005, from five to four percent.



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