Senate BillNo. 241


Introduced by Senator Evans

(Principal coauthor: Senator Jackson)

(Coauthors: Senators Beall, Block, DeSaulnier, Hancock, Leno, and Liu)

February 12, 2013


An act to add Part 21 (commencing with Section 42001) to Division 2 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

SB 241, as introduced, Evans. Oil severance Tax Law.

Existing law imposes various taxes, including taxes on the privilege of engaging in certain activities. The Fee Collection Procedures Law, the violation of which is a crime, provides procedures for the collection of certain fees and surcharges.

This bill would impose an oil severance tax on and after January 1, 2014, upon any producer for the privilege of severing oil from the earth or water in this state for sale, transport, consumption, storage, profit, or use, as provided, at the rate of 9.9% of the gross value of each barrel of oil severed. The tax would be administered by the Department of Conservation and would be collected pursuant to the procedures set forth in the Fee Collection Procedures Law. The bill would require the department to deposit all tax revenues, penalties, and interest collected pursuant to these provisions into the Oil Severance Fund, a continuously appropriated fund created by this bill, for allocation to the Regents of the University of California, the Trustees of the California State University, the Board of Governors of the California Community Colleges, and the Department of Parks and Recreation, as provided.

Because this bill would expand the scope of the Fee Collection Procedures Law, the violation of which is a crime, it would impose a state-mandated local program.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: 23. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Part 21 (commencing with Section 42001) is
2added to Division 2 of the Revenue and Taxation Code, to read:

3 

4PART 21.  OIL SEVERANCE TAX LAW

5

 

6

42001.  

This part shall be known and may be cited as the Oil
7Severance Tax Law.

8

42002.  

For purposes of this part, the following definitions shall
9apply:

10(a) “Barrel of oil” means 42 United States gallons of 231 cubic
11inches per gallon computed at a temperature of 60 degrees
12Fahrenheit.

13(b) “Department” means the Department of Conservation.

14(c) “Gross value” means the sale price at the mouth of the well
15in the case of oil, including any bonus, premium, or other thing of
16value paid for the oil. If there is no sale at the time of severance,
17“gross value” means the sale price when the oil is sold, including
18any bonus, premium, or other thing of value paid for the oil. If oil
19is exchanged for something other than cash, or if the relation
20between the buyer and the seller is such that the consideration
21paid, if any, is not indicative of the true value or market price, then
22the department shall determine the value of the oil subject to the
P3    1tax based on the cash price paid to producers for like quality oil
2in the vicinity of the well.

3(d) “Oil” means petroleum, or other crude oil, condensate, casing
4head gasoline, or other mineral oil that is mined, produced, or
5withdrawn from below the surface of the soil or water in this state.

6(e) “Producer” means any person or entity that takes oil from
7the earth or water in this state in any manner; any person that owns,
8controls, manages, or leases any oil well in the earth or water of
9this state; any person that produces or extracts in any manner any
10oil by taking it from the earth or water in this state; any person
11that acquires the severed oil from a person or agency exempt from
12property taxation under the United States Constitution or other
13laws of the United States or under the California Constitution or
14other laws of the State of California; and any person that owns an
15interest, including a royalty interest, in oil or its value, whether
16the oil is produced by the person owning the interest or by another
17on the person’s behalf by lease, contract, or other arrangement.

18(f) “Production” means the total gross amount of oil produced,
19including the gross amount attributable to a royalty or other
20interest.

21(g) “Severed” or “severing” means the extraction or withdrawing
22from below the surface of the earth or water of any oil, regardless
23of whether the extraction or withdrawal shall be by natural flow,
24mechanical flow, forced flow, pumping, or any other means
25employed to get the oil from below the surface of the earth or
26water, and shall include the extraction or withdrawal by any means
27whatsoever of oil upon which the tax has not been paid, from any
28surface reservoir, natural or artificial, or from a water surface.

29(h) “Stripper well” means a well that has been certified by the
30department as an oil well incapable of producing an average of
31more than 10 barrels of oil per day during the entire taxable month.
32Once a well has been certified as a stripper well, that stripper well
33shall remain certified as a stripper well until the well produces an
34average of more than 10 barrels of oil per day during an entire
35taxable month.

36

42003.  

On and after January 1, 2014, for the privilege of
37severing oil from the earth or water in this state for sale, transport,
38consumption, storage, profit, or use, a tax is hereby imposed upon
39all producers at the rate of 9.9 percent of the gross value of each
P4    1barrel of oil severed. The tax shall be applied equally to all portions
2of the gross value of each barrel of oil severed.

3

42004.  

Except as otherwise provided in this part, the tax shall
4be upon the entire production in this state, regardless of the place
5of sale or to whom sold or by whom used, or the fact that the
6delivery may be made to points outside the state.

7

42005.  

The tax imposed by this part shall be in addition to any
8ad valorem taxes imposed by the state, or any of its political
9subdivisions, or any local business license taxes that may be
10incurred as a privilege of severing oil from the earth or water or
11doing business in that locality. There shall be no exemption from
12payment of an ad valorem tax related to equipment, material, or
13property by reason of the payment of the gross severance tax
14pursuant to this part.

15

42006.  

Two or more producers that are corporations and are
16owned or controlled directly or indirectly, as defined in Section
1725105, by the same interests shall be considered as a single
18producer for purposes of application of the tax prescribed in this
19part.

20

42007.  

(a) There shall be exempted from the imposition of
21the oil severance tax imposed pursuant to this part oil produced
22by a stripper well in which the average value of oil as of January
231 of the prior year is less than thirty dollars ($30) per barrel.

24(b) For oil produced in this state from a well that qualifies under
25Section 3251 of the Public Resources Code or which has been
26inactive for a period of at least the preceding five consecutive
27years, the imposition of the oil severance tax shall be reduced to
28zero for a period of 10 years.

29

42008.  

The tax imposed by this part is due and payable to the
30department quarterly on or before the last day of the month next
31succeeding each calendar quarter.

32

42009.  

(a) Any person who fails to pay any tax within the time
33required shall pay, in addition to the amount of tax owed, plus
34interest at the rate of 112 percent per month, or fraction thereof,
35computed from the delinquent date of the assessment until and
36including the date of payment.

37(b) Each payment on a delinquent tax owed pursuant to this part
38shall be applied as follows:

39(1) First, to any interest due on the tax.

40(2) Second, to any penalty imposed by this part.

P5    1(3) Third, to the balance, if any, of the tax due.

2

42010.  

On or before the last day of the month following each
3quarterly period of three months, a return for the preceding
4quarterly period shall be filed with the department in the form as
5the department may prescribe.

6

42011.  

(a) The department shall deposit all tax revenues,
7penalties, and interest collected pursuant to this part in the Oil
8Severance Fund, which is hereby established in the State Treasury.

9(b) Notwithstanding Section 13340 all moneys in the fund are
10hereby continuously appropriated without regard to fiscal year as
11follows:

12(1) Ninety-three percent of the moneys in the fund, in equal
13shares, to the Regents of the University of California, the Trustees
14of the California State University, and the Board of Governors of
15the California Community Colleges for the general support of
16those institutions.

17(2) Seven percent of the moneys in the fund to the Department
18of Parks and Recreation for the maintenance and improvement of
19state parks.

20

42012.  

The department may prescribe those forms and reporting
21requirements as necessary to implement the tax, including, but not
22limited to, information regarding the location of the well by county,
23the gross amount of oil produced, the quantity sold and the selling
24price, the prevailing market price of oil, and the amount of tax
25due.

26

42013.  

The department shall administer and collect the tax
27imposed by this part pursuant to the Fee Collection Procedures
28Law (Part 30 (commencing with Section 55001) of Division 2).
29For purposes of this part, the reference in the Fee Collection
30Procedures Law to “fee” shall include the tax imposed by this part,
31to “feepayer” shall include a person required to pay the oil
32severance tax, and to “board” shall mean the Department of
33Conservation.

34

42014.  

In addition to the authority granted by Section 55301,
35the department may prescribe, adopt, and enforce emergency
36regulations relating to the administration and enforcement of this
37part. Any emergency regulations prescribed, adopted, or enforced
38pursuant to this section shall be adopted in accordance with Chapter
393.5 (commencing with Section 11340) of Part 1 of Division 3 of
40Title 2 of the Government Code, and for the purposes of that
P6    1chapter, including Section 11349.6 of the Government Code, the
2adoption of these regulations is an emergency and shall be
3considered by the Office of Administrative Law as necessary for
4the immediate preservation of the public peace, health and safety,
5and general welfare. Notwithstanding Chapter 3.5 (commencing
6with Section 11340) of Part 1 of Division 3 of Title 2 of the
7Government Code, including subdivision (e) of Section 11346.1
8of the Government Code, any emergency regulations adopted
9pursuant to this section shall be filed with, but not be repealed by,
10the Office of Administrative Law, and shall remain in effect until
11revised by the director.

12

42015.  

If any provision of this part or the application to any
13person or circumstances is held invalid, that invalidity shall not
14affect other provisions or applications of the part which can be
15given effect without the invalid provision or application, and to
16this end, the provisions of this part are severable.



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