Leech Tishman

Natural Gas Severance Tax Bill Introduced in the Pennsylvania House

By: Amanda L. Fitzhugh Porter, Esq.

On December 6, 2015, Representatives James Santora and Margo Davidson introduced the long-awaited Natural Gas Severance Tax Bill in the Pennsylvania House of Representatives. The Pennsylvania House Bill No. 1743 is titled: An Act amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated Statutes, in unconventional gas well fee, further providing for expiration; providing for natural gas severance tax; and establishing the Severance Tax for Education Fund.

The Bill provides that a natural gas severance tax of four percent (4%) of the gross value of the units severed at the wellhead during a reporting period shall be levied on every producer beginning July 1, 2015. According to the Bill, a producer is a person who engages or continues within the Commonwealth in the business of severing natural gas for sale, profit or commercial use. This Bill explicitly exempts a person who severs natural gas from a storage field. The Bill defines natural gas as a fossil fuel consisting of a mixture of hydrocarbon gases, primarily methane, possibly including ethane, propane, butane, pentane, carbon dioxide, oxygen, nitrogen and hydrogen sulfide and other gas species. It also includes natural gas from oil fields known as associated gas or casing head gas, natural gas fields known as non-associated gas, coal beds, shale beds and other formations. The Bill, however, explicitly exempts coalbed methane gas. The terms “severed” or “severing” refers to the extraction or other removal of natural gas from the soil or water of the Commonwealth.

Every producer will be required to file a return with the Pennsylvania Department of Revenue, the first of which will be due on August 15, 2015. The income received from this severance tax will be deposited in the Severance Tax for Education Fund. This Bill seeks to accomplish two goals. First, the legislature seeks to impose a severance tax and second, the legislature, pursuant to 58 Pa.C.S.A. §§2302 and 2318 seeks to repeal the unconventional well fee. It appears that House Bill No. 1743 will be retroactive to July 2015 for reporting purposes. For the full text of the proposed Bill go to: http://bit.ly/21JvaLO

Amanda L. Fitzhugh Porter is an associate in the Energy Practice Group in Leech Tishman’s Pittsburgh office. If you would like more information on this alert, please contact Amanda at (412) 261-1600 or aporter@leechtishman.com. Learn more about Leech Tishman’s Energy Practice Group here.

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Leech Tishman is a firm dedicated to providing full-service commercial legal services to individuals, businesses, and institutions. We combine a deep understanding of our clients and their businesses with skilled legal counsel to find solutions. Leech Tishman offers legal services in alternative dispute resolution, bankruptcy & creditors’ rights, construction, corporate, employment, energy, environmental, safety & toxic torts, estates & trusts, government relations, insurance coverage & corporate risk mitigation, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York and Wilmington, DE. For more information call 412.261.1600 or visit us at www.leechtishman.com.

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