SB 241, as amended, 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 and gas severance tax upon any operator, as defined, for the privilege of severing oil or gas from the earth or water in this state for sale, transport, consumption, storage, profit, or use, as provided, at the specified
begin delete notesend delete, calculated as provided. The tax would be administered by the State Board of Equalization and would be collected pursuant to the
procedures set forth in the Fee Collection Procedures Law. The bill would require the board to deposit all tax revenues, penalties, and interest collected pursuant to these provisions into the California Higher Education 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, begin delete andend delete 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:
Part 21 (commencing with Section 42001) is
2added to Division 2 of the Revenue and Taxation Code, to read:
This part shall be known and may be cited as the Oil
7Severance Tax Law.
For purposes of this part, the following definitions shall
10(a) “Barrel of oil” means 42 United States gallons of 231 cubic
11inches per gallon computed at a temperature of 60 degrees
13(b) “California Higher Education Fund” or “CHEF” means the
14fund that is created by Section 42147.
15(c) “Gas” means all natural gas, including casing head gas, and
16all other hydrocarbons not defined as oil in subdivision (f).
17(d) “Division” means the
Division of Oil, Gas, and Geothermal
18Resources in the Department of Conservation.
19(e) “In this state” means within the exterior limits of the State
20of California and includes all territory within these limits owned
P3 1by or ceded to the United States of America. “In this state” includes
2the mean high tide line to three nautical miles offshore.
3(f) “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.
6(g) “Operator” means a person that, by virtue of ownership, or
7under the authority of a lease or any other agreement, has the right
8to drill, operate, maintain, or control an oil or gas well in the earth
9or water in this state, including any person that takes oil or gas
10from the earth or water in this state in any manner, any person that
11owns, controls, manages, or leases any oil or gas well in the earth
12or water of this state, and any person that produces or extracts in
13any manner any oil or gas by taking it from the earth or water in
14this state; and includes the first person that acquires either the legal
15title or beneficial title to oil or gas taken from the earth or water
16in this state by the federal government or a federal instrumentality.
17(h) “Political subdivision of the state” includes any local public
18entity, as defined in Section 900.4 of the Government Code.
19(i) “Severed” or “severing” means the extraction or withdrawing
20 from below the surface of the earth or water of any oil or gas,
21regardless of whether the extraction or withdrawal shall be by
22natural flow, mechanical flow, forced flow, pumping, or any other
23means employed to get the oil or gas from below the surface of
24the earth or water, and shall include the extraction or withdrawal
25by any means whatsoever of oil or gas upon which the tax has not
26been paid, from any surface reservoir, natural or artificial, or from
27a water surface.
begin deleteStripper end deletewell” means a well that has been certified
29by the division as an oil well incapable of producing an average
30of more than 10 barrels of oil per day during the entire calendar
31month or a gas well that is incapable of producing more than
3260,000 cubic feet of gas per day. Once a well has been certified
33as a stripper well, that stripper well shall remain certified as a
34stripper well until the well produces an average of more than 10
35barrels of oil per day during an entire calendar month.
36(k) “Unit of gas” means 1,000 cubic feet (mcf) measured at a
37base pressure of 15.025 pounds per square inch absolute and at a
38temperature base of 60 degrees Fahrenheit.
(a) (1) An oil and gas severance tax is hereby imposed
40upon any operator for the privilege of severing oil or gas from the
P4 1earth or water in this state at the rate of
begin delete 9.5%end delete of the
2average price per barrel of California oil or
begin delete ____%end delete of
3the average price per unit of gas, as calculated pursuant to this
5(2) (A) On or before December 1, 2013, and June 1, 2014, and
6on or before those dates of each year thereafter, the division shall
7determine the average price per barrel of California oil for the
8six-month period ending on the preceding October 31 and April
930, respectively. The price of California oil shall be based on the
10first purchase price for California Midway-Sunset crude oil as
11determined by the United States Energy Information
12Administration’s (EIA) First Purchase Report. In the event the
13EIA First Purchase Report is delayed or discontinued, the division
14may base its determination on other sources of first purchase prices
15of California oil.
16(B) On or before December 1, 2013, and June 1, 2014, and on
17or before those dates of each year thereafter, the division shall
18determine the average price per unit of gas for the six-month period
19ending on the preceding October 31 and April 30, respectively.
20The price of gas shall be based on California’s price for gas as
21determined by the United States Energy Information
22Administration’s (EIA) Report. In the event the EIA Report is
23delayed or discontinued, the division may base its determination
24on other sources of city gate prices of California gas.
25(C) The division shall notify the board of its determinations
26pursuant to subparagraphs (A) and (B), on or before December 1,
272013, and June 1, 2014, and on or before those dates on each year
29(b) Any person that owns an interest, including a royalty interest,
30 in oil or its value, is liable for the tax until it has been paid to the
The tax imposed by this part shall be in addition to any
33other taxes imposed by law, including, without limitation, any ad
34valorem taxes imposed by the state, or any political subdivision
35of the state, or any local business license taxes that may be incurred
36for the privilege of severing oil or gas from the earth or water or
37doing business in that locality. There shall be no exemption from
38the payment of an ad valorem tax related to equipment, material,
39or other property by reason of the payment of the severance tax
40pursuant to this part.
(a) The tax imposed by this part shall not be passed
2through to consumers by way of higher prices for oil, natural gas,
3gasoline, diesel, or other oil or gas consumable byproducts, such
4as propane and heating oil. The board shall monitor and, if
5necessary, investigate any instance where operators or purchasers
6of the oil or gas have attempted to gouge consumers by using the
7tax as a pretext to materially raise the price of oil, natural gas,
8gasoline, diesel, or other oil or gas consumable byproducts, such
9as propane and heating oil.
10(b) The board may prescribe, adopt, and enforce rules and
11regulations relating to the administration and enforcement of this
13(c) Any operator that fails to comply with this section shall pay
14a penalty in an amount specified by the board not to exceed ____
15dollars ($____) for each instance the operator violates this section,
16as defined by the board in the regulatory process.
17(d) This section applies when not superseded by federal law.
Two or more operators that are owned or controlled
19directly or indirectly, as defined in Section 25105, by the same
20interests shall be considered as a single operator for purposes of
21application of the tax prescribed in this part.
(a) There shall be exempted from the imposition of
23the oil and gas severance tax imposed pursuant to this part, the
24severance of oil or gas produced by a stripper
begin delete well when, as .
25determined pursuant to Section 42010, the average price per barrel
26of California oil is ____ dollars ($____) or less, or when the
27average price per unit of gas is____ dollars ($____) or lessend delete
29(b) The division shall notify the board of all wells that have
30been certified as stripper wells.
There shall be exempted from the imposition of the tax
32imposed pursuant to this part all oil, gas, or both oil and gas owned
33or produced by the state or any political subdivision of the state,
34including such public entity’s proprietary share of oil or gas
35produced under any unit, cooperative, or other pooling agreement.
Each operator shall prepare and file with the board a
37return in the form prescribed by the board containing information
38as the board deems necessary or appropriate for the proper
39administration of this part. The return shall be filed on or before
40the last day of the calendar month following the calendar quarter
P6 1to which it relates, together with a remittance payable to the board
2for the amount of tax due for that period.
(a) The board shall administer and collect the tax
4imposed by this part pursuant to the Fee Collection Procedures
5Law (Part 30 (commencing with Section 55001)). For purposes
6of this part, the references in the Fee Collection Procedures Law
7to “fee” shall include the tax imposed by this part and references
8to “feepayer” shall include any person liable for the payment of
9the tax imposed by this part.
10(b) The board may prescribe, adopt, and enforce regulations
11relating to the administration and enforcement of this part,
12including, but not limited to, provisions governing collections,
13reporting, refunds, and appeals.
14(c) The board may prescribe, adopt, and enforce emergency
15regulations relating to the administration and enforcement of this
16part. Any emergency regulations prescribed, adopted, or enforced
17pursuant to this section shall be adopted in accordance with Chapter
183.5 (commencing with Section 11340) of Part 1 of Division 3 of
19Title 2 of the Government Code, and, for purposes of that chapter,
20including Section 11349.6 of the Government Code, the adoption
21of these regulation is an emergency and shall be considered by the
22Office of Administrative Law as necessary for the immediate
23preservation of the public peace, health and safety, and general
(a) All taxes, interest, penalties, and other amounts
26collected pursuant to this part, less refunds and costs of
27administration, shall be deposited into the California Higher Education Fund, which is hereby
29created in the State Treasury. Notwithstanding Section 13340 of
30the Government Code, moneys in the fund are continuously
31appropriated, without regard to fiscal year, as follows:
33equal shares, to the Regents of the University of California, the
34Trustees of the California State University, and the Board of
35Governors of the California Community Colleges for the general
36support of those institutions.
begin deleteSevenend delete begin delete end deletepercent of the moneys in the fund to the
38Department of Parks and Recreation for the maintenance and
39improvement of state parks.
4(b) Revenues, less refunds, derived pursuant to Section 42013
5for deposit in the California Higher Education Fund pursuant to
6this section shall be deemed “General Fund revenues,” “General
7Fund proceeds of taxes,” and “moneys to be applied by the State
8for the support of school districts and community college districts”
9for purposes of Section 8 of Article XVI.
No reimbursement is required by this act pursuant to
16Section 6 of Article XIII B of the California Constitution because
17the only costs that may be incurred by a local agency or school
18district will be incurred because this act creates a new crime or
19infraction, eliminates a crime or infraction, or changes the penalty
20for a crime or infraction, within the meaning of Section 17556 of
21the Government Code, or changes the definition of a crime within
22the meaning of Section 6 of Article XIII B of the California