Amended in Senate April 24, 2013

Senate Bill No. 241

Introduced by Senator Evans

(Principal coauthor: Senator Jackson)

(Coauthors: Senators Beall, Block, DeSaulnier, Hancock, Leno, begin delete and end delete Liu begin insert , and Wolk end insert )

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 amended, Evans. Oil begin delete severance end delete begin insert Severance end insert 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 begin insert end insert begin insert and gas end insert severance tax begin delete on and after January 1, 2014, end delete upon any begin delete producer end delete begin insert operator, as defined, end insert for the privilege of severing oil begin insert or gas end insert from the earth or water in this state for sale, transport, consumption, storage, profit, or use, as provided, at begin delete the rate of 9.9% of the gross value of each barrel of oil severed end delete begin insert the specified notes, calculated as provided end insert . The tax would be administered by the begin delete Department of Conservation end delete begin insert State Board of Equalization end insert and would be collected pursuant to the procedures set forth in the Fee Collection Procedures Law. The bill would require the begin delete department end delete begin insert board end insert to deposit all tax revenues, penalties, and interest collected pursuant to these provisions into the begin delete Oil Severance end delete begin insert California Higher Education end insert 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 2⁄3 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: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.

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

begin insert

begin insert SECTION 1. end insert   

end insert

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

begin insert

 

PART  begin insert 21. end insert   OIL SEVERANCE TAX LAW

 

begin insert 42001. end insert   

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

begin insert 42002. end insert   

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

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

(b) “California Higher Education Fund” or “CHEF” means
the fund that is created by Section 42147.

(c) “Gas” means all natural gas, including casing head gas,
and all other hydrocarbons not defined as oil in subdivision (f).

(d) “Division” means the Division of Oil, Gas, and Geothermal
Resources in the Department of Conservation.

(e) “In this state” means within the exterior limits of the State
of California and includes all territory within these limits owned
by or ceded to the United States of America. “In this state”
includes the mean high tide line to three nautical miles offshore.

(f) “Oil” means petroleum, or other crude oil, condensate,
casing head gasoline, or other mineral oil that is mined, produced,
or withdrawn from below the surface of the soil or water.

(g) “Operator” means a person that, by virtue of ownership,
or under the authority of a lease or any other agreement, has the
right to drill, operate, maintain, or control an oil or gas well in
the earth or water in this state, including any person that takes oil
or gas from the earth or water in this state in any manner, any
person that owns, controls, manages, or leases any oil or gas well
in the earth or water of this state, and any person that produces
or extracts in any manner any oil or gas by taking it from the earth
or water in this state; and includes the first person that acquires
either the legal title or beneficial title to oil or gas taken from the
earth or water in this state by the federal government or a federal
instrumentality.

(h) “Political subdivision of the state” includes any local public
entity, as defined in Section 900.4 of the Government Code.

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

(j) Stripper well” means a well that has been certified by the
division as an oil well incapable of producing an average of more
than 10 barrels of oil per day during the entire calendar month or
a gas well that is incapable of producing more than 60,000 cubic
feet of gas per day. Once a well has been certified as a stripper
well, that stripper well shall remain certified as a stripper well
until the well produces an average of more than 10 barrels of oil
per day during an entire calendar month.

(k) “Unit of gas” means 1,000 cubic feet (mcf) measured at a
base pressure of 15.025 pounds per square inch absolute and at
a temperature base of 60 degrees Fahrenheit.

begin insert 42010. end insert   

(a) (1) An oil and gas severance tax is hereby imposed
upon any operator for the privilege of severing oil or gas from the
earth or water in this state at the rate of 9.5% of the average price
per barrel of California oil or ____% of the average price per unit
of gas, as calculated pursuant to this section.

(2) (A) On or before December 1, 2013, and June 1, 2014, and
on or before those dates of each year thereafter, the division shall
determine the average price per barrel of California oil for the
six-month period ending on the preceding October 31 and April
30, respectively. The price of California oil shall be based on the
first purchase price for California Midway-Sunset crude oil as
determined by the United States Energy Information
Administration’s (EIA) First Purchase Report. In the event the
EIA First Purchase Report is delayed or discontinued, the division
may base its determination on other sources of first purchase prices
of California oil.

(B) On or before December 1, 2013, and June 1, 2014, and on
or before those dates of each year thereafter, the division shall
determine the average price per unit of gas for the six-month period
ending on the preceding October 31 and April 30, respectively.
The price of gas shall be based on California’s price for gas as
determined by the United States Energy Information
Administration’s (EIA) Report. In the event the EIA Report is
delayed or discontinued, the division may base its determination
on other sources of city gate prices of California gas.

(C) The division shall notify the board of its determinations
pursuant to subparagraphs (A) and (B), on or before December
1, 2013, and June 1, 2014, and on or before those dates on each
year thereafter.

(b) Any person that owns an interest, including a royalty interest,
in oil or its value, is liable for the tax until it has been paid to the
board.

begin insert 42012. end insert   

The tax imposed by this part shall be in addition to any
other taxes imposed by law, including, without limitation, any ad
valorem taxes imposed by the state, or any political subdivision
of the state, or any local business license taxes that may be
incurred for the privilege of severing oil or gas from the earth or
water or doing business in that locality. There shall be no
exemption from the payment of an ad valorem tax related to
equipment, material, or other property by reason of the payment
of the severance tax pursuant to this part.

begin insert 42013. end insert   

(a) The tax imposed by this part shall not be passed
through to consumers by way of higher prices for oil, natural gas,
gasoline, diesel, or other oil or gas consumable byproducts, such
as propane and heating oil. The board shall monitor and, if
necessary, investigate any instance where operators or purchasers
of the oil or gas have attempted to gouge consumers by using the
tax as a pretext to materially raise the price of oil, natural gas,
gasoline, diesel, or other oil or gas consumable byproducts, such
as propane and heating oil.

(b) The board may prescribe, adopt, and enforce rules and
regulations relating to the administration and enforcement of this
section.

(c) Any operator that fails to comply with this section shall pay
a penalty in an amount specified by the board not to exceed ____
dollars ($____) for each instance the operator violates this section,
as defined by the board in the regulatory process.

(d) This section applies when not superseded by federal law.

begin insert 42014. end insert   

Two or more operators that are owned or controlled
directly or indirectly, as defined in Section 25105, by the same
interests shall be considered as a single operator for purposes of
application of the tax prescribed in this part.

begin insert 42015. end insert   

(a) There shall be exempted from the imposition of the
oil and gas severance tax imposed pursuant to this part, the
severance of oil or gas produced by a stripper well when, as
determined pursuant to Section 42010, the average price per barrel
of California oil is ____ dollars ($____) or less, or when the
average price per unit of gas is____ dollars ($____) or less.

(b) The division shall notify the board of all wells that have
been certified as stripper wells.

begin insert 42016. end insert   

There shall be exempted from the imposition of the tax
imposed pursuant to this part all oil, gas, or both oil and gas owned
or produced by the state or any political subdivision of the state,
including such public entity’s proprietary share of oil or gas
produced under any unit, cooperative, or other pooling agreement.

begin insert 42019. end insert   

Each operator shall prepare and file with the board a
return in the form prescribed by the board containing information
as the board deems necessary or appropriate for the proper
administration of this part. The return shall be filed on or before
the last day of the calendar month following the calendar quarter
to which it relates, together with a remittance payable to the board
for the amount of tax due for that period.

begin insert 42145. end insert   

(a) The board shall administer and collect the tax
imposed by this part pursuant to the Fee Collection Procedures
Law (Part 30 (commencing with Section 55001)). For purposes
of this part, the references in the Fee Collection Procedures Law
to “fee” shall include the tax imposed by this part and references
to “feepayer” shall include any person liable for the payment of
the tax imposed by this part.

(b) The board may prescribe, adopt, and enforce regulations
relating to the administration and enforcement of this part,
including, but not limited to, provisions governing collections,
reporting, refunds, and appeals.

(c) The board may prescribe, adopt, and enforce emergency
regulations relating to the administration and enforcement of this
part. Any emergency regulations prescribed, adopted, or enforced
pursuant to this section shall be adopted in accordance with
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division
3 of Title 2 of the Government Code, and, for purposes of that
chapter, including Section 11349.6 of the Government Code, the
adoption of these regulation is an emergency and shall be
considered by the Office of Administrative Law as necessary for
the immediate preservation of the public peace, health and safety,
and general welfare.

begin insert 42147. end insert   

(a) All taxes, interest, penalties, and other amounts
collected pursuant to this part, less refunds and costs of
administration, shall be deposited into the California Higher
Education Fund, which is hereby created in the State Treasury.
Notwithstanding Section 13340 of the Government Code, moneys
in the fund are continuously appropriated, without regard to fiscal
year, as follows:

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

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

(b) Revenues, less refunds, derived pursuant to Section 42013
for deposit in the California Higher Education Fund pursuant to
this section shall be deemed “General Fund revenues,” “General
Fund proceeds of taxes,” and “moneys to be applied by the State
for the support of school districts and community college districts”
for purposes of Section 8 of Article XVI.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert begin insert

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

end insert

All matter omitted in this version of the bill appears in the bill as introduced in the Senate, February 12, 2013. (JR11)