Around the Capitol this week…severance tax & other legislation… | Marcellus Minutes
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Around the Capitol this week…severance tax & other legislation…

The House and Senate were in session this week. They are on Memorial Day break next week and will return on June 7.

On Monday the House Appropriations Committee amended severance tax language into HB 325, page 22.   The tax imposed would be 8% of the gross value of units severed plus 7 cents per unit severed. It exempts stripper wells. The bill remains on the House calendar. The House Environmental Resources and Energy Committee met on Tuesday to consider the two House bills below:  HB 2213 (George): The bill would require the DEP to inspect Marcellus well sites during each drilling phase; extend to 2,500 feet, from 1,000 feet, the presumed liability of a well polluting a water supply; require disclosure of the chemicals used in the hydraulic fracturing of natural gas from the earth; update bonding requirements to cover the costs of decommissioning a well; clarify local governments’ traditional authority to regulate oil and gas activities. To read the bill, click here. The bill was reported as amended on a mostly party-line vote with the republican members voting no. The amendment by Chairman Bud George made technical changes and changed well permitting and inspection requirements. Representative Chris Ross noted a lot of useful improvements in the amendment, but questioned the rebuttable presumption. He said it was overly broad and punitive to have “any pollution” that is not the fault of the driller as a liability. He commented that the overall bill is good with the amendment. On final passage of the bill, Representative Garth Everett said he supports the concepts in the amended bill but has concerns about the implementation. He went on to say that the distance restriction is "undoable" and will result in the industry to "grinding to a halt." He also cited capacity tests on wells as expensive. HB 2214 (George) The bill requires that the royalty calculation in any oil and gas leases must exclude all post production expenses and that the royalty is to be based on the gross proceeds received at the point of sale in a competitive, arms-length bargain. The bill was reported as committed on a party-line vote with the republican members voting no. Representative Chris Ross noted that the Commonwealth should not get involved in private negotiations. Representative Matt Gabler reinforced Representative Ross’s comments and said there are many leases that exceed the minimum 12 percent royalty. Minority Chairman Scott Hutchinson said passage of the bill would create uncertainty and expense by overturning well established common law precedent concerning royalty payments and would create a dual industry with different standards. Representative Dave Reed questioned if all wells on the property would be subject to renegotiation. Staff said only the wells in question would be. Representative Jim Christiana cited the 18 percent royalty on state land the Commonwealth receives and said reducing the percentage could cause a future budget deficit. Staff said the number in the legislation is the floor and not the ceiling. They also responded to Representative Everett that bill is prospective and will not affect existing leases. HB 2235, the moratorium on leasing of additional state land has been referred to the Senate Environmental Resources Committee. Both Committee and Leadership staff have indicated the Senate is unlikely to consider the bill. SB 1092 has received first consideration and remains in the Senate Appropriations Committee. The original bill required the operator to provide the DEP with a cement quality log or other approved method to ensure the adequacy of the cement used to encase the well. The bill was amended by striking the existing language and inserting requirements that the Environmental Quality Board promulgate regulations governing the design, construction, completion and operation of oil and gas wells to minimize the threat that migration of gas or fluids present to drinking water supplies and public safety. The effective date of the bill was changed from “60 days” to immediately. To read the bill, click here.

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