THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BOBACK, CARROLL, HENNESSEY AND MURT, SEPTEMBER 26, 2011

REFERRED TO COMMITTEE ON FINANCE, SEPTEMBER 26, 2011  

AN ACT

Imposing a natural gas well operational fee; providing for the

powers and duties of the Department of Revenue and the

Department of Community and Economic Development; and

establishing the Marcellus Revenue Sharing Account and the

Local Government Services Account.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Marcellus

Revenue Sharing Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Accredited laboratory."  A facility engaged in the testing

and calibration of scientific measurement devices and certified

by the Department of Environmental Protection as having met the

department's standards for accreditation.

"Association."  A partnership, limited partnership or any

other form of unincorporated enterprise owned or conducted by

two or more persons.

"Coal bed methane."  Gas which can be produced from coal

beds, coal seams, mined-out areas or gob wells.

"Corporation."  A corporation, joint stock association,

limited liability company, business trust or any other

incorporated enterprise organized under the laws of this

Commonwealth, the United States or any other state, territory or

foreign country or dependency.

"County."  A county of the second class A, third, fourth,

fifth, sixth, seventh or eighth class, including any county of

these classes which has adopted or may adopt a home rule charter

under 53 Pa.C.S. Pt. III Subpt. E (relating to home rule and

optional plan government).

"Department."  The Department of Revenue of the Commonwealth.

"Fee."  The natural gas well operational fee.

"Meter."  A device to measure the passage of volumes of gases

or liquids past a certain point.

"Municipality."  A city, borough, incorporated town or

township.

"Natural gas."  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. The term includes

natural gas from oil fields known as associated gas or casing

head gas, natural gas fields known as nonassociated gas, coal

beds, shale beds and other formations. The term does not include

coal bed methane.

"Natural gas well."  A bore hole drilled or being drilled for

the purpose of or to be used for producing natural gas from

subsurface geological formations.

"Operator."  A person who engages or continues within this

Commonwealth in the business of severing natural gas for sale,

profit or commercial use. The term does not include a person who

severs natural gas from a storage field.

"Person."  A natural person or a corporation, fiduciary,

association or other entity, including the Commonwealth and any

of its political subdivisions, instrumentalities and

authorities. When the term is used in a clause prescribing and

imposing a penalty or imposing a fine or imprisonment, or both,

the term shall include a member, as applied to an association,

and an officer, as applied to a corporation.

"Producing well."  A natural gas well that produces natural

gas in excess of 90,000 cubic feet of natural gas per day.

"Reporting period."  A calendar month in which natural gas is

severed.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Sever."  To extract or otherwise remove natural gas from the

soil or water of this Commonwealth.

"Storage field."  A natural formation or other site that is

used to store natural gas that did not originate from and has

been injected into the formation or site.

"Unit."  A thousand cubic feet of natural gas measured at a

wellhead at a temperature of 60 degrees Fahrenheit and an

absolute pressure of 14.73 pounds per square inch in accordance

with American Gas Association Standards and according to Boyle's

Law for the measurement of gas under varying pressures with

deviations as follows:

(1)  The average absolute atmospheric pressure shall be

assumed to be 14.4 pounds to the square inch, regardless of

elevation or location of point of delivery above sea level or

variations in atmospheric pressure from time to time.

(2)  The temperature of the gas passing the meters shall

be determined by the continuous use of a recording

thermometer installed to properly record the temperature of

gas flowing through the meters. The arithmetic average of the

temperature recorded each 24-hour day shall be used in

computing gas volumes. If a recording thermometer is not

installed, or is installed and not operating properly, an

average flowing temperature of 60 degrees Fahrenheit shall be

used in computing gas volume.

(3)  The specific gravity of the gas shall be determined

annually by tests made by the use of an Edwards or Acme

gravity balance or at intervals as found necessary in

practice. Specific gravity determinations shall be used in

computing gas volumes.

(4)  The deviation of the natural gas from Boyle's law

shall be determined by annual tests or at other shorter

intervals as found necessary in practice. The apparatus and

method used in making the test shall be in accordance with

recommendations of the National Bureau of Standards or Report

No. 3 of the Gas Measurement Committee of the American Gas

Association, or amendments thereto. The results of the tests

shall be used in computing the volume of gas delivered under

this act.

"Wellhead meter."  A meter placed at a producing or

nonproducing site to measure the volume of natural gas severed

for which a wellhead meter certification has been issued.

"Wellhead meter certification."  A report issued by an

accredited laboratory certifying the accuracy of a wellhead

meter.

Section 3.  Natural gas well operational fee.

(a)  Establishment.--Beginning January 30, 2012, and each

year thereafter, an operator shall pay a natural gas well

operational fee on each producing well owned or operated in this

Commonwealth.

(b)  Calculation of fee.--The fee shall be 1.5% of the gross

value of units severed at a wellhead during a reporting period

for the first 60 months of production and 5% of the gross value

of units severed at the wellhead during a reporting period

thereafter for each producing well.

(c)  Exemptions.--The fee shall not be imposed on the

following:

(1)  Units severed, sold and delivered by an operator at

or within five miles of the producing well for the processing

or manufacture of tangible personal property, as defined

under section 201 of the act of March 4, 1971 (P.L.6, No.2),

known as the Tax Reform Code of 1971, within this

Commonwealth.

(2)  Units provided free of charge to the owner of the

surface under which the natural gas is severed if the surface

owner is the end user of the natural gas.

(3)  Owners of the surface real property where natural

gas wells are drilled or operated and who have leased the

rights to recover natural gas from beneath the surface to an

operator.

Section 4.  Return and payment.

(a)  Requirement.--An operator shall file a return with the

department, on a form prescribed by the department, which shall

include the number of units in excess of 90,000 cubic feet per

day severed by the operator for the reporting period and the

amount of fee due under section 3.

(b)  Filing.--The return required by subsection (a) shall be

filed with the department within 30 days following the end of a

reporting period.

(c)  Deadline.--The fee is due on the day the return is

required to be filed and becomes delinquent if not remitted to

the department by that date.

Section 5.  Penalties.

(a)  Failure to file a timely certificate.--An operator who

willfully fails to file a timely certificate required under this

act shall be assessed an administrative fine equal to 100% of

the fee liability required to be reported on the certificate.

The department shall enforce this penalty.

(b)  Fraudulent certificate.--An operator, with intent to

defraud the Commonwealth, who willfully makes or causes to be

made a certificate required by this act which is false, shall,

upon finding by the department, be ordered to pay an

administrative fine of not more than 100% of the liability.

(c)  Penalties or other acts.--

(1)  Except as otherwise provided by subsection (a), an

operator shall be ordered to pay a fine of not more than

$50,000 and costs of prosecution for any of the following:

(i)  Willfully failing to timely remit the fee to the

department.

(ii)  Willfully failing or neglecting to timely file

a certificate or report required by this act.

(iii)  Refusing to timely pay a penalty or interest

imposed or provided for by this act.

(iv)  Willfully failing to preserve its books, papers

and records as directed by the department.

(v)  Refusing to permit the department or its

authorized agents to examine its books, records or

papers.

(vi)  Knowingly making any incomplete, false or

fraudulent certificate or report required by this act.

(vii)  Preventing or attempting to prevent the full

disclosure of the amount of the fee due.

(viii)  Providing any person with a false statement

as to the payment of the fee with respect to any

pertinent facts.

(ix)  Making, uttering or issuing a false or

fraudulent statement required by this act.

(2)  The penalties imposed by this section shall be in

addition to other penalties imposed by law.

Section 6.  Recordkeeping.

(a)  Duty to maintain records.--An operator required to pay

the fee shall keep records, including those enumerated in this

subsection, render statements, file certificates and comply with

the rules and regulations as the department may prescribe

regarding matters pertinent to the operator's business.

(b)  Power of department.--Whenever it is necessary, the

department may require an operator, by notice served upon the

operator, to file certificates, render statements or keep

records as the department deems sufficient to show whether the

operator is liable to pay the fee.

(c)  Records.--An operator required to pay the fee shall

maintain records, statements and other instruments as the

department may prescribe by regulation.

(d)  Examinations.--The department or any of its authorized

agents may:

(1)  Examine the books, papers and records of an operator

in order to verify the accuracy and completeness of the fee

paid.

(2)  Require the preservation of all books, papers and

records for any period deemed proper by it, but not to exceed

five years from the end of the calendar year to which the

records relate.

(3)  Examine an operator, under oath, concerning any

matter relating to the enforcement or administration of this

act and, to this end, may compel the production of books,

papers and records and the attendance of all persons whether

as parties or witnesses whom it believes to have knowledge of

relevant matters.

(e)  Duties of operators.--An operator shall provide the

department or its agent with the means, facilities and

opportunity for examinations and investigations under this act.

(f)  Unauthorized disclosure.--

(1)  Information gained by the department as a result of

a certificate, examination, investigation, hearing or

verification required or authorized by this act shall be

confidential, except for official purposes, or in accordance

with proper judicial order or as otherwise provided by law.

(2)  A person who unlawfully divulges information

required to be kept confidential under this act shall, upon

conviction thereof, be sentenced to pay a fine of not more

than $1,000 and costs of prosecution.

Section 7.  Wellhead meters.

An operator shall provide for and maintain, according to

industry standards, a discrete wellhead meter where natural gas

is severed. A wellhead meter installed after the effective date

of this section shall be a digital meter.

Section 8.  Accounts established.

(a)  Marcellus Revenue Sharing Account.--

(1)  The Marcellus Revenue Sharing Account is established

as a restricted account within the General Fund.

(2)  The proceeds of the fee and penalties and interest

imposed under this act shall be deposited into the account.

(3)  The money in the account shall only be used in

accordance with section 9.

(b)  Local Government Services Account.--

(1)  The Local Government Impact Account is established

as a restricted account within the General Fund. The moneys

of the account are hereby appropriated on a continuing basis

to the Department of Community and Economic Development.

(2)  The allocation under section 9(a)(3) shall be

deposited into the account.

Section 9.  Transfers and distributions.

On the last business day of each calendar month, the State

Treasurer shall make the following transfers and distributions

of the money in the Marcellus Revenue Sharing Account:

(1)  Thirty-five percent to the Property Tax Relief Fund.

(2)  Twenty-five percent to the Local Government Impact

Account, to be further distributed by the Department of

Community and Economic Development under section 10.

(3)  Twenty-four percent to the Environmental Stewardship

Fund.

(4)  Ten percent to the Motor License Fund to provide for

road and bridge repairs in this Commonwealth.

(5)  Two percent to the Conservation District Fund for

distribution to county conservation districts pursuant to

guidelines established by the State Conservation Commission.

(6)  Two percent to the Department of Education to fund

grants available to institutions of higher education in this

Commonwealth to research energy, environmental, safety,

community education, economic and other issues related to the

development of natural gas in this Commonwealth.

(7)  One percent to the Hazardous Sites Cleanup Fund.

(8)  One percent to the Pennsylvania Fish and Boat

Commission.

Section 10.  Local government impact grants.

(a)  Program to be established.--The Department of Community

and Economic Development shall establish a competitive grant

program using funds in the Local Government Impact Account to

assist counties and municipalities in this Commonwealth with the

remediation of impacts to the environment or transportation

infrastructure directly associated with natural gas development.  

(b)  Priority.--Priority for grants under subsection (a)

shall be given to municipalities hosting producing wells within

their jurisdictions.

Section 11.  Annual reports.

(a)  Department of Revenue.--

(1)  On February 1 of each year, the department shall

submit to the Governor and the General Assembly an annual

report of funds collected and distributed under this act for

the prior year.

(2)  The department shall publish and maintain the annual

report on its publicly accessible Internet website. The

annual report required under this section may be submitted to

the Governor and the General Assembly by electronic mail.

(b)  Department of Community and Economic Development.--

(1)  On February 1 of each year, the Department of

Community and Economic Development, in conjunction with the

Department of Revenue, shall submit to the Governor and the

General Assembly an annual report of funds collected and

distributed under this act for the prior year.

(2)  The annual report shall, at a minimum, include the

following:

(i)  The total amount expended from the fund on

grants and total number of projects completed.

(ii)  The location of each project.

(iii)  A description of each project funded and the

total project cost.

(3)  The department shall publish and maintain the annual

report on its publicly accessible Internet website. The

annual report required under this section may be submitted to

the Governor and the General Assembly by electronic mail.

Section 12.  Regulations.

The department and the Department of Community and Economic

Development may promulgate regulations to effectuate the

provisions of this act.

Section 13.  Expiration.

(a)  Notice.--The Secretary of the Commonwealth shall, upon

the effective date of an act authorizing a severance tax on each

unconventional well producing gas in this Commonwealth, submit

for publication in the Pennsylvania Bulletin notice of that

fact.

(b)  Date.--This act shall expire on the date of the

publication of the notice under subsection (a).

Section 14.  Effective date.

This act shall take effect in 60 days.