Bill Text: PA SB680 | 2011-2012 | Regular Session | Introduced


Bill Title: Further providing for definitions, for well permits, for well location restrictions and for protection of water supplies; providing for use of surface impoundments for temporary flowback storage; and further providing for well reporting requirements, for bonding, for enforcement orders, for penalties, for civil penalties, for well plugging funds and for local ordinances.

Spectrum: Partisan Bill (Democrat 8-0)

Status: (Introduced - Dead) 2011-03-28 - Referred to ENVIRONMENTAL RESOURCES AND ENERGY [SB680 Detail]

Download: Pennsylvania-2011-SB680-Introduced.html

  

 

    

PRINTER'S NO.  925

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

SENATE BILL

 

No.

680

Session of

2011

  

  

INTRODUCED BY FERLO, FONTANA, HUGHES, TARTAGLIONE, LEACH, FARNESE AND DINNIMAN, MARCH 28, 2011

  

  

REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, MARCH 28, 2011  

  

  

  

AN ACT

  

1

Amending the act of December 19, 1984 (P.L.1140, No.223),

2

entitled "An act relating to the development of oil and gas

3

and coal; imposing duties and powers on the Department of

4

Environmental Resources; imposing notification requirements

5

to protect landowners; and providing for definitions, for

6

various requirements to regulate the drilling and operation

7

of oil and gas wells, for gas storage reservoirs, for various

8

reporting requirements, including certain requirements

9

concerning the operation of coal mines, for well permits, for

10

well registration, for distance requirements, for well casing

11

requirements, for safety device requirements, for storage

12

reservoir obligations, for well bonding requirements, for a

13

Well Plugging Restricted Revenue Account to enforce oil and

14

gas well plugging requirements, for the creation of an Oil

15

and Gas Technical Advisory Board, for oil and gas well

16

inspections, for enforcement and for penalties," further

17

providing for definitions, for well permits, for well

18

location restrictions and for protection of water supplies;

19

providing for use of surface impoundments for temporary

20

flowback storage; and further providing for well reporting

21

requirements, for bonding, for enforcement orders, for

22

penalties, for civil penalties, for well plugging funds and

23

for local ordinances.

24

The General Assembly of the Commonwealth of Pennsylvania

25

hereby enacts as follows:

26

Section 1.  Section 103 of the act of December 19, 1984

27

(P.L.1140, No.223), known as the Oil and Gas Act, is amended by

28

adding definitions to read:

 


1

Section 103.  Definitions.

2

The following words and phrases when used in this act shall

3

have the meanings given to them in this section unless the

4

context clearly indicates otherwise:

5

"12-digit Hydrologic Unit Code."  A subwatershed, generally

6

ranging in size from 10,000 to 40,000 acres, as designated by

7

the United States Geological Survey and the United States

8

Department of Agriculture Natural Resources Conservation

9

Service.

10

* * *

11

"Body of water."  A natural or artificial lake, pond,

12

reservoir, swamp, marsh or wetland.

13

* * *

14

"Erosion and sediment control permit."  A permit issued by

15

the Department of Environmental Protection and required for

16

earth disturbance activities associated with oil and gas

17

activities.

18

"FEMA."  The Federal Emergency Management Agency.

19

"Flood."  A general but temporary condition of partial or

20

complete inundation of normally dry land areas from the overflow

21

of streams, rivers or other waters of this Commonwealth.

22

"Floodplain."  The lands adjoining a river or stream that

23

have been or may be expected to be inundated by flood waters in

24

a 100-year frequency flood. Unless otherwise specified, the

25

boundary of the floodplain is as indicated on maps and flood

26

insurance studies provided by the Federal Emergency Management

27

Agency or equivalent floodplain maps and studies. In an area

28

where no such maps or studies have defined the boundary of the

29

100-year floodplain, it is assumed, absent evidence to the

30

contrary, that the floodplain extends from the stream to 100

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1

feet from the top of the streambank.

2

"Floodway."  The channel of the watercourse and portions of

3

the adjoining floodplains which are reasonably required to carry

4

and discharge the 100-year frequency flood. Unless otherwise

5

specified, the boundary of the floodway is as indicated on maps

6

and flood insurance studies provided by the Federal Emergency

7

Management Agency. In an area where no Federal Emergency

8

Management Agency maps or studies have defined the boundary of

9

the 100-year frequency floodway, it is assumed, absent evidence

10

to the contrary, that the floodway extends from the stream to 50

11

feet from the top of the streambank.

12

* * *

13

"Stream."  A watercourse.

14

"Unconventional formation."  Formations such as the

15

Rhinestreet, Burket, Marcellus, Madata and Utica shale, or other

16

formations existing below the base of the Elk Sandstone or its

17

geologic equivalent stratigraphic interval.

18

"Unconventional well."  A well intending to produce or

19

producing from an unconventional formation.

20

"Watercourse."  A channel or conveyance of surface water

21

having defined bed and banks, whether natural or artificial,

22

with perennial or intermittent flow.

23

* * *

24

"Wild trout stream."  A stream classified as supporting

25

naturally reproducing trout populations by the Fish and Boat

26

Commission.

27

"Wilderness trout stream."  A surface water designated by the

28

Fish and Boat Commission to protect and promote native trout

29

fisheries and maintain and enhance wilderness aesthetics and

30

ecological requirements necessary for the natural reproduction

- 3 -

 


1

of trout.

2

* * *

3

Section 2.  Section 201(a), (b), (e), (f) and (g) of the act,

4

amended July 2, 1992 (P.L.365, No.78), are amended to read:

5

Section 201.  Well permit.

6

(a)  No person shall drill a well or alter any existing well,

7

except for alterations which satisfy the requirements of

8

subsection (j), without having first obtained a well permit

9

pursuant to subsections (b), (c), (d) and (e). A copy of the

10

permit shall be kept at the well site during [drilling or]

11

preparation and construction of the well site or access road,

12

drilling, operation and alteration of the well. However, no

13

person shall be required to obtain a permit to redrill a

14

nonproducing well, if:

15

(1)  the redrilling has been evaluated and approved as

16

part of an order from the department authorizing the cleaning

17

out and plugging or replugging of a nonproducing well,

18

pursuant to section 13(c) of the act of December 18, 1984

19

(P.L.1069, No.214), known as the Coal and Gas Resource

20

Coordination Act; and

21

(2)  the redrilling is incidental to the plugging or

22

replugging operation and the well subsequently is plugged

23

within 15 days of redrilling.

24

(b)  The permit application shall be accompanied by a plat

25

prepared by a competent engineer or a competent surveyor, on

26

forms to be furnished by the department, showing the political

27

subdivision and county in which the tract of land upon which the

28

well to be drilled, operated or altered, is located, the name of

29

the surface landowner of record and lessor, the name of all

30

surface landowners or water purveyors whose water supplies are

- 4 -

 


1

within 1,000 feet, or in the case of an unconventional well

2

within 5,000 feet, of the [proposed well location] outer

3

boundary of the proposed well pad and access roads, the name of

4

the owner of record or operator of all known underlying workable

5

coal seams, if any, the acreage in the tract to be drilled, the

6

proposed location of the well determined by survey, the courses

7

and distances of such location from two or more permanent

8

identifiable points or landmarks on said tract boundary corners,

9

the proposed angle and direction of such well, if the well is to

10

be deviated substantially from a vertical course, the number or

11

other identification to be given the well, the workable coal

12

seams, if any, underlying the tract of land upon which the well

13

is to be drilled, operated or altered, which are to be cased off

14

in accordance with section 207, and such information needed by

15

the department to administer this act. The applicant shall

16

forward, by certified mail, a copy of said plat to each

17

political subdivision in which the well is to be located, the

18

surface landowner, all surface landowners or water purveyors

19

whose water supplies are within 1,000 feet, or in the case of an

20

unconventional well within 5,000 feet, of the [proposed well

21

location] outer boundary of the proposed well pad and access

22

roads, the owner and lessee, if any, of such coal seams, and

23

every coal operator required to be identified on the well permit

24

application and shall submit proof of such notification with the

25

well permit application. With respect to surface owners,

26

notification shall be accomplished under this section by sending

27

notice to the persons to whom the tax notices for said surface

28

property are sent, as indicated in the assessment books in the

29

county in which the property is located. With respect to surface

30

landowners or water purveyors whose water supplies are within

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1

1,000 feet, or in the case of an unconventional well within

2

5,000 feet, of the [proposed well location] outer boundary of

3

the proposed well pad and access roads, notification shall be

4

made on forms and in a manner prescribed by the department

5

sufficient to identify, for such persons, the rights afforded

6

them under section 208 and the advisability of taking their own

7

predrilling or prealteration survey. With respect to the

8

political subdivision in which the well is to be located,

9

notification shall be made on forms and in a manner prescribed

10

by the department. If the applicant submits to the department

11

written approval of the proposed well location by the political

12

subdivision in which the well is to be located, the surface

13

landowner and the coal operator, lessee or owner, if any, of the

14

coal underlying the proposed well location and no objections are

15

raised by the department within 15 days of filing or if no such

16

approval has been submitted and no objections are made to such

17

proposed well location within 15 days from receipt of such

18

notice by the political subdivision in which the well is to be

19

located, the surface landowner and the coal operator, lessee or

20

owner, if any, or by the department, the same shall be filed and

21

become a permanent record of such location, subject to

22

inspection at any time by any interested person. The application

23

form to operate an abandoned or orphan well shall notify the

24

applicant of its responsibilities to plug the well upon

25

abandonment.

26

* * *

27

(e)  The department shall issue a permit within 45 days of

28

the submission of a permit application unless the department

29

denies the permit application for one or more of the [five]

30

reasons set forth below: Provided, however, That the department

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1

shall have the right to extend such period for 15 days for cause

2

shown upon notification to the applicant of the reasons for that

3

extension. The department may impose such permit terms and

4

conditions as are necessary to assure compliance with this act

5

and other laws administered by the department. The department

6

shall have the authority to deny a permit to any person for the

7

following reasons:

8

(1)  the well site for which a permit is requested is in

9

violation of any of the provisions of this act, or if

10

issuance of such permit would result in a violation of this

11

act or any other applicable environmental statute, rule or

12

regulation;

13

(2)  the permit application is incomplete;

14

(3)  unresolved objections to the well location by coal

15

mine owner or operator remain;

16

(4)  the requirements of section 215 have not been met;

17

[or]

18

(5)  the applicant, with respect to any other well or

19

wells which the applicant operates, is in continuing

20

violation of this act or any other applicable statute

21

administered by the department and the likely result of that

22

violation is an unsafe operation or environmental damage. If

23

a final determination has been made in the applicant's favor,

24

the permit denied shall be reconsidered and the violation

25

shall not be a consideration in the awarding of the permit.

26

The department may not collect an application fee for the

27

reconsideration[. The right of the department to deny a

28

permit under this paragraph shall not be effective until a

29

final administrative determination has been made of any of

30

these violations and no appeal is pending in which a stay has

- 7 -

 


1

been granted.];

2

(6)  the applicant failed to pay or file a return under

3

section 5A04, unless a valid appeal is in process. The

4

Secretary of Revenue shall notify the department of any

5

applicant who has failed to pay or file a return and who does

6

not have a valid appeal pending; or

7

(7)  the applicant does not have a reasonable written

8

plan to reuse at least 30% of the total water that will be

9

used to hydraulically fracture the well.

10

(f)  Upon issuance of a permit, the well operator may proceed

11

[with the drilling of] to prepare or construct the well site and

12

access roads and drill, operate or alter the well at the exact

13

location shown on the plat after providing the department, the

14

surface landowner and the local political subdivision in which

15

the well is to be located 24 hours' notice of the date that

16

drilling will commence. In noncoal areas where more than one

17

well is to be drilled as part of the same development project,

18

only the first well of the project need be located by survey.

19

The remaining wells of the project shall be shown on the plat in

20

a manner prescribed by regulation. Prior to drilling each of the

21

additional project wells, the well operator shall notify the

22

department of his intention and provide reasonable notice of the

23

date drilling will commence. Whenever, before or during the

24

drilling of any well which is not within the outside boundaries

25

of an operating coal mine, the well operator shall encounter

26

conditions of such a nature as to render drilling of the bore

27

hole or portions thereof more hazardous than usual, or otherwise

28

impossible, then the well operator shall have the right, upon

29

verbal notice to the department, to immediately plug all or

30

portions of the bore hole, if drilling has occurred, and to

- 8 -

 


1

commence a new bore hole not more than 50 feet distant if the

2

location of the new bore hole does not violate section 205 and

3

if, for wells subject to the act of July 25, 1961 (P.L.825,

4

No.359), known as the Oil and Gas Conservation Law, the new

5

location complies with any existing law, regulation or spacing

6

order and if the new bore hole is a minimum of 330 feet distant

7

from the nearest lease boundary. Within ten days of commencement

8

of the new bore hole, the well operator shall file with the

9

department a written notice of intention to plug, a well record,

10

a completion report, a plugging certificate for the original

11

bore hole and an amended plat for the new bore hole. The well

12

operator shall forward a copy of the amended plat to the surface

13

landowner identified on the well permit application within ten

14

days of commencement of the new well bore.

15

(g)  The well permit number and operator's name, address and

16

telephone number shall be posted at the drilling site, in a

17

conspicuous manner, prior to [commencement of drilling]

18

initiating preparation and during construction of the well site

19

or access road, drilling, operation and alteration of the well.

20

* * *

21

Section 3.  Section 205 of the act is amended to read:

22

Section 205.  Well location restrictions.

23

(a)  Wells may not be drilled within 200 feet, or in the case

24

of an unconventional well within 1,500 feet, measured

25

horizontally from any existing building or existing water well

26

without the written consent of the owner thereof. Where the

27

distance restriction would deprive the owner of the oil and gas

28

rights of the right to produce or share in the oil or gas

29

underlying said surface tract, the well operator may be granted

30

a variance from said distance restriction upon submission of a

- 9 -

 


1

plan which shall identify the additional measures, facilities or

2

practices to be employed during well site construction, drilling

3

and operations. The variance, if granted, shall include such

4

additional terms and conditions as the department shall require

5

to insure the safety and protection of affected persons and

6

property. The provisions may include insurance, bonding and

7

indemnification, as well as technical requirements.

8

(b)  No well site may be prepared or well drilled within

9

[100] 500 feet measured horizontally from any [stream, spring or

10

body of water as identified on the most current 7 ½ minute

11

topographic quadrangle map of the United States Geological

12

Survey] watercourse, natural or artificial lake, pond or

13

reservoir or within [100 feet of any wetlands greater than one

14

acre in size.] the boundary of a wetland or the boundary that

15

affects the functions and values of a wetland. However, no well

16

may be drilled using hydraulic fracturing or horizontal drilling

17

within 2,500 feet of a surface water source, and within 1,000

18

feet of a groundwater source or an exceptional value water

19

source as designated under 25 Pa. Code 93.4b (relating to

20

qualifying as High Quality or Exceptional Value Waters), that

21

serves a public water system. The distance from the public water

22

supply source, as identified by the department, shall be

23

measured as follows:

24

(1)  For a surface water intake on a lake or reservoir,

25

the distance shall be measured from the boundary of the lake

26

or reservoir.

27

(2)  For a surface water intake on a flowing stream, the

28

distance shall be measured from a semicircular radius

29

extending upstream of the surface water intake.

30

(3)  For a groundwater source, the distance shall be

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1

measured from the wellhead or spring.

2

The department may waive such distance restrictions upon

3

submission of a plan which shall identify the additional

4

measures, facilities or practices to be employed during well

5

site construction, drilling and operations. Such waiver, if

6

granted, shall impose such permit conditions as are necessary to

7

protect the waters of the Commonwealth.

8

(c)  [The] On making a determination on a well permit, the 

9

department shall[, on making a determination on a well permit,] 

10

consider and may deny or condition a well permit based on the

11

impact of the proposed well on public resources to include, but

12

not be limited to, the following:

13

(1)  Publicly owned parks, forests, gamelands and

14

wildlife areas.

15

(2)  National or State scenic rivers.

16

(3)  National natural landmarks.

17

(4)  Habitats of rare and endangered flora and fauna and

18

other critical communities.

19

(5)  Historical and archaeological sites listed on the

20

Federal or State list of historic places.

21

(6)  Bodies of water and watercourses, including, but not

22

limited to, wetlands, wild trout streams and wilderness trout

23

streams.

24

(7)  Sources used for public drinking water supplies.

25

(8)  Whether the proposed well location is within a

26

floodplain.

27

(d)  The department shall establish additional protective

28

measures for storage of hazardous chemicals and materials

29

intended to be used, or that have been used, on an

30

unconventional well drilling site within 1,000 feet of a

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1

watercourse, natural or artificial lake, pond, reservoir,

2

wetland or groundwater source that serves a public water system,

3

or within 5,000 feet of a surface water source that serves a

4

public water system.

5

(e)  Prior to submitting a permit application to the

6

department for a well or well site within a wild trout stream,

7

wilderness trout stream or a High Quality or Exceptional Value

8

watershed as indicated by the 12-digit Hydrologic Unit Code, the

9

applicant shall notify the Pennsylvania Fish and Boat

10

Commission.

11

Section 4.  Section 208(a), (c) and (d) of the act are

12

amended and the section is amended by adding subsections to

13

read: 

14

Section 208.  Protection of water supplies.

15

(a)  [Any] In addition to the requirements of subsection

16

(c.1), a well operator who affects a public or private water

17

supply by pollution or diminution shall restore or replace the

18

affected supply with an alternate source of water adequate in

19

quantity or quality for the purposes served by the supply. The

20

department shall ensure the restored or replaced water supply

21

meets the applicable water quality standards consistent with the

22

Safe Drinking Water Act (Public Law 93-523, 21 U.S.C. § 349 and

23

42 U.S.C. §§ 201 and 300f et seq.), the act of May 1, 1984

24

(P.L.206, No.43), known as the Pennsylvania Safe Drinking Water

25

Act, and predrilling or alteration water quality standards as

26

determined by the department. The Environmental Quality Board

27

shall promulgate regulations necessary to meet the requirements

28

of this subsection.

29

* * *

30

(b.1)  The department shall establish a single Statewide

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1

toll-free telephone number that persons may use to report cases

2

of water contamination. The Statewide toll-free telephone number

3

shall be provided in a conspicuous manner in the notification

4

required under section 201(b) and on the department's Internet

5

website.

6

(b.2)  The department shall develop appropriate

7

administrative responses to calls received on the Statewide

8

toll-free number for water contamination.

9

(b.3)  The department shall establish a website that lists

10

the confirmed cases of water supply contamination that result

11

from hydraulic fracturing.

12

(c)  Unless rebutted by one of the five defenses established

13

in subsection (d), it shall be presumed that a well operator is

14

responsible for the pollution of a water supply that is within

15

1,000 feet, or in the case of an unconventional well within

16

5,000 feet, of the oil or gas well, where the pollution occurred

17

within six months after [the completion of drilling] the

18

drilling, stimulation or alteration of such well.

19

(c.1)  If the affected water supply is within the rebuttable

20

presumption area as provided in subsection (c) and the

21

rebuttable presumption applies and the water user is without a

22

readily available alternative source of water, the operator

23

shall provide a temporary water supply within 24 hours of being

24

contacted by the water user or the department, whichever occurs

25

first. The temporary water supply provided under this subsection

26

shall be adequate in quantity and quality for the purposes

27

served by the supply.

28

(d)  In order to rebut the presumption of liability

29

established in subsection (c), the well operator must

30

affirmatively prove one of the following five defenses:

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1

(1)  The pollution existed prior to the drilling, 

2

stimulation or alteration [activity] activities as determined

3

by a predrilling or prealteration survey.

4

(2)  The landowner or water purveyor refused to allow the

5

operator access to conduct a predrilling or prealteration

6

survey.

7

(3)  The water supply is not within 1,000 feet, or in the

8

case of an unconventional well within 5,000 feet, of the

9

well.

10

(4)  The pollution occurred more than six months after

11

[completion of drilling] the drilling, stimulation or

12

alteration activities.

13

(5)  The pollution occurred as the result of some cause

14

other than the drilling, stimulation or alteration [activity]

15

activities.

16

* * *

17

Section 5.  The act is amended by adding sections to read:

18

Section 208.1.  Use of surface impoundments for temporary

19

flowback storage.

20

Where centralized flowback impoundments are used to

21

temporarily store flowback water, the department shall require

22

the use of dual liner systems with a leak detection system

23

installed between the two liners. The department shall inspect

24

such impoundments on a monthly basis.

25

Section 208.2.  Transportation records; hydraulic fracturing

26

fluids.

27

Each well operator who transports hydraulic fracturing fluids

28

shall maintain records of the amount and destination of the

29

fluids transported. The records shall be on a form approved by

30

the department.

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1

(1)  Recordkeeping requirements shall be determined by

2

the department and shall include at least the following:

3

(i)  The number of gallons of hydraulic fracturing

4

fluids used in the drilling, stimulation or alteration of

5

a well.

6

(ii)  Upon completion of the well, the name of the

7

person or company who transports the hydraulic fracturing

8

fluids to a disposal site or a location other than the

9

well site.

10

(iii)  The location where hydraulic fracturing fluids

11

were disposed or to which they were transported and the

12

volumes that were disposed of at each location.

13

(iv)  The method of disposal.

14

(2)  Records shall be retained by the well operator for a

15

period of five years. The records shall be made available to

16

the department upon request.

17

Section 6.  Section 212(b) of the act, amended March 22, 2010

18

(P.L.169, No.15), is amended and the section is amended by

19

adding subsections to read:

20

Section 212.  Well reporting requirements.

21

* * *

22

(b)  It shall be the duty of the well operator to keep

23

records of any well drilled or altered. A record of the well

24

containing such information as required by [regulation] the

25

department, including the information required under subsection

26

(b.1), shall be filed with the department within 30 days [of

27

cessation of drilling] after stimulation of the well. A

28

completion report containing such additional information as

29

required by regulation shall be filed with the department within

30

30 days after [the completion] stimulation of the well and it

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1

shall be kept on file by the department. Within 90 days after

2

the completion of drilling or recompletion of a well, if

3

requested by the department, the well operator shall submit a

4

copy of the electrical, radioactive or other standard industry

5

logs if they have been run. In addition, if requested by the

6

department within one year, the well operator shall file a copy

7

of drill stem test charts, formation water analysis, porosity,

8

permeability or fluid saturation measurements, core analysis and

9

lithologic log or sample description or other similar data as

10

compiled. No such information shall be required unless the well

11

operator has had such information compiled in the ordinary

12

course of business. No interpretation of the data is to be

13

filed.

14

(b.1)  Report contents.--The completion report shall contain

15

the operator's stimulation record which shall include the

16

following:

17

(1)  A descriptive list of the chemical additives in the

18

stimulation fluids, including any acid, biocide, breaker,

19

brine, corrosion inhibitor, crosslinker, demulsifier,

20

friction reducer, get, iron control, oxygen scavenger, pH

21

adjusting agent, proppant, scale inhibitor and surfactant.

22

(2)  The percent by volume of each chemical additive in

23

the stimulation fluid.

24

(3)  A list of the chemicals in the material safety data

25

sheets, by name and chemical abstract service number,

26

corresponding to the appropriate chemical additive.

27

(4)  The percent by volume of each chemical list in the

28

material safety data sheets.

29

(5)  The total volume of the base fluid.

30

(6)  A list of water sources used under the approved

- 16 -

 


1

water management plan and the volume of water used.

2

(7)  The pump rates and pressure used in the well.

3

(8)  The depth at which potable aquifers are encountered.

4

(b.2)  Trade secret or confidential proprietary

5

information.--When an operator submits its stimulation record

6

under subsection (b.1), it may designate specific portions of

7

the stimulation record as containing a trade secret or

8

confidential proprietary information. The department shall

9

prevent disclosure of the designated confidential information to

10

the extent permitted by the act of February 14, 2008 (P.L.6,

11

No.3), known as the Right-to-Know Law. However, in the event of

12

an emergency well, the department shall make available the

13

entire completion report to emergency personnel that respond.

14

(b.3)  List of the chemical constituents.--In addition to

15

submitting a stimulation record to the department under

16

subsection (b.1) and subject to the protections afforded for

17

trade secrets and confidential proprietary information under the

18

Right-to-Know Law, the operator shall provide a list of the

19

chemical constituents of the chemical additives used to

20

hydraulically fracture a well, by name and chemical abstract

21

service number, unless the additive does not have a number, to

22

the department upon written request of the department.

23

* * *

24

Section 7.  Section 215(a), (c), (d), (d.1) and (f) of the

25

act, amended July 2, 1992 (P.L.365, No.78), are amended to read: 

26

Section 215.  Bonding.

27

(a)  (1)  Except as provided in subsection (d) hereof, upon

28

filing an application for a well permit and before continuing

29

to operate any oil or gas well, the owner or operator thereof

30

shall file with the department a bond for the well and the

- 17 -

 


1

well site on a form to be prescribed and furnished by the

2

department. Any such bond filed with an application for a

3

well permit shall be payable to the Commonwealth and

4

conditioned that the operator shall faithfully perform all of

5

the drilling, water supply replacement, restoration and

6

plugging requirements of this act. Any such bond filed with

7

the department for a well in existence on the effective date

8

of this act shall be payable to the Commonwealth and

9

conditioned that the operator shall faithfully perform all of

10

the water supply replacement, restoration and plugging

11

requirements of this act. The amount of the bond required

12

shall be in the [amount of $2,500 per well for at least two

13

years following the effective date of this act, after which

14

time the bond amount] following amounts and may be adjusted

15

by the Environmental Quality Board every [two] three years to

16

reflect the projected costs to the Commonwealth of performing

17

well plugging[.]:

18

(i)  For wells less than 2,500 feet in depth:

19

(A)  $2,500 per well, provided the operator shall

20

not be required to provide a bond under this item

21

exceeding $35,000 for 25 wells.

22

(B)  For operating 26 to 50 wells, $35,000 plus

23

$2,500 per well, provided the operator may not be

24

required to provide a bond under this item exceeding

25

$60,000.

26

(C)  For operating 51 to 100 wells, $60,000 plus

27

$2,500 per well, provided the operator may not be

28

required to provide a bond under this item exceeding

29

$100,000.

30

(D)  For operating over 100 wells, $100,000 plus

- 18 -

 


1

$2,500 per well, provided the operator may not be

2

required to provide a bond under this item exceeding

3

$250,000.

4

(ii)  For wells between 2,500 feet and 5,000 feet in

5

depth:

6

(A)  $5,000 per well, provided the operator may

7

not be required to provide a bond under this item

8

exceeding $70,000 for 25 wells.

9

(B)  For operating 26 to 50 wells, $70,000 plus

10

$5,000 per well, provided the operator may not be

11

required to provide a bond under this item exceeding

12

$120,000.

13

(C)  For operating 51 to 100 wells, $120,000 plus

14

$5,000 per well, provided the operator may not be

15

required to provide a bond under this item exceeding

16

$200,000.

17

(D)  For operating over 100 wells, $200,000 plus

18

$5,000 per well, provided the operator may not be

19

required to provide a bond under this item exceeding

20

$500,000.

21

(iii)  For wells over 5,000 feet in depth:

22

(A)  $12,500 per well, provided the operator may

23

not be required to provide a bond under this item

24

exceeding $220,000 for 25 wells.

25

(B)  For operating 26 to 50 wells, $220,000 plus

26

$12,500 per well, provided the operator may not be

27

required to provide a bond under this item exceeding

28

$375,000.

29

(C)  For operating 51 to 100 wells, $375,000 plus

30

$12,500 per well, provided the operator may not be

- 19 -

 


1

required to provide a bond under this item exceeding

2

$625,000.

3

(D)  For operating over 100 wells, $625,000 plus

4

$12,500 per well.

5

[(2)  In lieu of individual bonds for each well, an owner

6

or operator may file a blanket bond, on a form prepared by

7

the department, covering all of its wells in Pennsylvania as

8

enumerated on the bond form. A blanket bond shall be in the

9

amount of $25,000 for at least two years following the

10

effective date of this act, after which time the bond amount

11

may be adjusted by the Environmental Quality Board every two

12

years to reflect the projected costs to the Commonwealth of

13

performing well plugging.]

14

(3)  Liability under such bond shall continue until the

15

well has been properly plugged in accordance with this act

16

and for a period of one year after filing of the certificate

17

of plugging with the department. Each bond shall be executed

18

by the operator and a corporate surety licensed to do

19

business in the Commonwealth and approved by the secretary.

20

The operator may elect to deposit cash, certificates of

21

deposit or automatically renewable irrevocable letters of

22

credit from financial institutions chartered or authorized to

23

do business in Pennsylvania and regulated and examined by the

24

Commonwealth or a Federal agency which may be terminated at

25

the end of a term only upon the financial institution giving

26

90 days prior written notice to the permittee and the

27

department or negotiable bonds of the United States

28

Government or the Commonwealth, the Pennsylvania Turnpike

29

Commission, the General State Authority, the State Public

30

School Building Authority or any municipality within the

- 20 -

 


1

Commonwealth, or United States Treasury Bonds issued at a

2

discount without a regular schedule of interest payments to

3

maturity, otherwise known as Zero Coupon Bonds, having a

4

maturity date of not more than ten years after the date of

5

purchase and at such maturity date having a value of not less

6

than $25,000, with the department in lieu of a corporate

7

surety. The cash deposit, certificate of deposit, amount of

8

such irrevocable letter of credit or market value of such

9

securities shall be equal at least to the sum of the bond.

10

The secretary shall, upon receipt of any such deposit of

11

cash, letters of credit or negotiable bonds, immediately

12

place the same with the State Treasurer, whose duty it shall

13

be to receive and hold the same in the name of the

14

Commonwealth, in trust, for the purpose for which such

15

deposit is made. The State Treasurer shall at all times be

16

responsible for the custody and safekeeping of such deposits.

17

The operator making deposit shall be entitled from time to

18

time to demand and receive from the State Treasurer, on the

19

written order of the secretary, the whole or any portion of

20

any collateral so deposited, upon depositing with him, in

21

lieu thereof, other collateral of the classes herein

22

specified having a market value at least equal to the sum of

23

the bond, and also to demand, receive and recover the

24

interest and income from said negotiable bonds as the same

25

becomes due and payable. Where negotiable bonds, deposited as

26

aforesaid, mature or are called, the State Treasurer, at the

27

request of the owner thereof, shall convert such negotiable

28

bonds into such other negotiable bonds of the classes herein

29

specified as may be designated by the owner. Where notice of

30

intent to terminate a letter of credit is given, the

- 21 -

 


1

department shall give the operator 30 days' written notice to

2

replace the letter of credit with other acceptable bond

3

guarantees as provided herein and, if the owner or operator

4

fails to replace the letter of credit within the 30-day

5

notification period, the department shall draw upon and

6

convert such letter of credit into cash and hold it as a

7

collateral bond guarantee.

8

* * *

9

(c)  If the well owner or operator fails or refuses to comply

10

with the applicable requirements of this act identified in

11

subsection (a), the regulations promulgated hereunder or the

12

conditions of the permit relating thereto, the department may

13

declare the bond forfeited and shall certify the same to the

14

Attorney General, who shall proceed to enforce and collect the

15

full amount of the bond and, where the owner or operator has

16

deposited cash or securities as collateral in lieu of a

17

corporate surety, the department shall declare said collateral

18

forfeited and shall direct the State Treasurer to pay the full

19

amount of said funds into the Well Plugging Restricted Revenue

20

Account or to proceed to sell said security to the extent

21

forfeited and pay the proceeds thereof into the Well Plugging

22

Restricted Revenue Account. Should any corporate surety or

23

financial institution fail to promptly pay, in full, a forfeited

24

bond, it shall be disqualified from writing any further bonds

25

under the act or any other environmental act administered by the

26

department. Any person aggrieved by reason of forfeiting the

27

bond or converting collateral, as herein provided, shall have a

28

right to appeal to the Environmental Hearing Board in the manner

29

provided by law. Upon forfeiture of a [blanket] bond for a

30

violation occurring at one or more well sites, the person whose

- 22 -

 


1

bond is forfeited shall submit a replacement bond to cover all

2

other wells of which he is owner or operator within ten days of

3

said forfeiture. Failure to submit said replacement bond

4

constitutes a violation of this section as to each of the wells

5

owned or operated by said person.

6

(d)  [(1)  Any operator of not more than 200 wells who cannot

7

obtain a bond for a well drilled prior to April 18, 1985, as

8

required under subsection (a), due to an inability to

9

demonstrate sufficient financial resources may, in lieu of

10

the bond:

11

(i)  Submit to the department a fee in the amount of

12

$50 per well, or a blanket fee of $500 for ten to 20

13

wells, or a blanket fee of $1,000 for more than 20 wells,

14

which shall be a nonrefundable fee paid each year that

15

the operator has not filed a bond with the department.

16

All fees collected in lieu of a bond under this

17

subsection shall be used for the purposes authorized by

18

this act. The Environmental Quality Board shall have the

19

power, by regulation, to increase the amount of the fees

20

established under this subsection.

21

(ii)  (A)  Make phased deposits of collateral to

22

fully collateralize the bond. Such payment shall be

23

based on the number of wells the operator owns or

24

operates. The operator shall make an initial deposit

25

and shall, thereafter, make annual deposits in

26

accordance with the schedule in clause (B). Interest

27

accumulated by the collateral shall become a part of

28

the bond until such time as the collateral plus

29

accumulated interest equals the amount of the

30

required bond. The collateral shall be deposited, in

- 23 -

 


1

trust, with the State Treasurer as provided in this

2

subsection, or with a bank selected by the department

3

which shall act as trustee for the benefit of the

4

Commonwealth to guarantee the operator's compliance

5

with the drilling, water supply replacement,

6

restoration and plugging requirements of this act.

7

The operator shall be required to pay all costs of

8

the trust.

9

(B)  An operator of up to ten existing wells who

10

does not intend to operate additional wells shall

11

deposit $250 per well and shall, thereafter, annually

12

deposit $50 per well until the obligations of this

13

section are fully met. An operator of 11 to 25 wells

14

or an operator of up to ten wells who applies for one

15

or more permits for additional wells shall deposit

16

$2,000 and shall, thereafter, annually deposit $1,150

17

plus $150 for each additional well to be permitted

18

that year until the obligations of this section are

19

fully met. An operator of 26 to 50 wells shall

20

deposit $3,000 and shall, thereafter, annually

21

deposit $1,300 plus $400 for each additional well to

22

be permitted that year until the obligations of this

23

section are fully met. An operator of 51 to 100 wells

24

shall deposit $4,000 and shall, thereafter, annually

25

deposit $1,500 plus $400 for each additional well to

26

be permitted that year until the obligations of this

27

section are fully met. Operators of 101 to 200 wells

28

shall deposit $8,000 and shall, thereafter, annually

29

deposit $1,600 plus $1,000 for each additional well

30

to be permitted that year until the obligations of

- 24 -

 


1

this section are fully met. Operators of more than

2

200 wells shall fully bond their wells immediately.

3

The department shall reduce the amount of phased

4

collateral payments or the period of time over which

5

phased collateral payments shall be made on behalf of

6

owners or operators who, prior to the effective date

7

of this amendatory act, have paid a fee in lieu of

8

bond pursuant to subparagraph (i), and who, within

9

one year of the effective date of this amendatory

10

act, choose to enter the phased collateral program

11

pursuant to this subparagraph (ii) rather than to

12

continue to make payments in lieu of bond. Payments

13

made in lieu of bond prior to the effective date of

14

this amendatory act shall not be credited in any

15

other manner, nor shall the department be required to

16

refund such fees at any time. The Environmental

17

Quality Board shall have the power, by regulation, to

18

change the annual deposits established under this

19

clause if it is found to be necessary to accommodate

20

a change in the amount of the bond required under

21

this section.

22

(2)  An operator may continue to pay a fee in lieu of

23

bond or make phased deposits of collateral to fully

24

collateralize the bond so long as the operator does not miss

25

any payments for wells as provided under this subsection and

26

so long as the operator remains in compliance with the

27

provisions of this act and regulations and permits issued

28

thereunder. If an operator has missed any payments for wells

29

as provided under this subsection, the operator shall:

30

(i)  immediately submit the appropriate bond amount

- 25 -

 


1

in full; or

2

(ii)  cease all operations and plug the wells in

3

accordance with section 210.

4

(d.1)  (1)  An individual who cannot obtain a bond to drill

5

new wells due to an inability to demonstrate financial

6

resources may meet the collateral bond requirements of

7

subsection (a) by making phased deposits of collateral to

8

fully collateralize the bond. Such individuals shall be

9

limited to drilling ten new wells per calendar year. The

10

individual shall, for each well to be drilled, deposit $500

11

and shall, thereafter, annually deposit 10% of the remaining

12

bond amount for a period of ten years. Interest accumulated

13

by the collateral shall become a part of the bond until such

14

time as the collateral, plus accumulated interest, equals the

15

amount of the required bond. The collateral shall be

16

deposited, in trust, with the State Treasurer as provided in

17

subsection (a) or with a bank selected by the department

18

which shall act as trustee for the benefit of the

19

Commonwealth, to guarantee the individual's compliance with

20

the drilling, water supply replacement, restoration and

21

plugging requirements of this act. The individual shall be

22

required to pay all costs of the trust.

23

(2)  Individuals may continue to use phased collateral to

24

obtain permits so long as they have not missed any payments

25

for wells drilled under this provision and so long as they

26

remain in compliance with this act and regulations and

27

permits issued thereunder. If an individual has missed any

28

payments for wells under this subsection, the operator shall:

29

(i)  immediately submit the appropriate bond amount

30

in full; or

- 26 -

 


1

(ii)  cease all operations and plug the wells in

2

accordance with section 210.

3

For the purposes of this subsection an "individual" is defined

4

as an applicant who is a natural person doing business under his

5

own name.] The Environmental Quality Board shall, by regulation,

6

develop an alternative financial assurance requirement in which

7

an operator may voluntarily choose to participate. An operator

8

participating in the alternative financial assurance requirement

9

established pursuant to this paragraph may be exempt from a bond

10

specified under subsection (a). The alternative financial

11

assurance requirement may require an insurance policy, trust

12

fund or financial mechanism but must provide for full coverage

13

of an operator's well plugging liability as determined by the

14

board. The alternative financial assurance mechanism may only be

15

utilized to plug wells upon abandonment and may not be forfeited

16

or otherwise recovered for violations of the act.

17

* * *

18

[(f)  Owners or operators who have failed to meet the

19

requirements of this section prior to the effective date of this

20

amendatory act shall not be required to make payments pursuant

21

to this section on a retroactive basis as a condition of

22

obtaining a permit under this act nor shall such failure be

23

deemed a violation of this act.]

24

Section 8.  Sections 503(c), 505 and 506 of the act are

25

amended to read:

26

Section 503.  Enforcement orders.

27

* * *

28

(c)  Prior to the suspension or revocation of a well permit

29

or registration, the department shall serve written notice upon

30

the well operator or its agent of the intention of the

- 27 -

 


1

department to suspend or revoke and shall state with specificity

2

the statutory provisions, appropriate rule or regulation or

3

other reason and the factual circumstances which surround the

4

violation upon which the suspension or revocation is to be

5

based. The well operator shall have 15 days to request a

6

conference with the department to give such cause why such

7

action should not be taken. Upon receipt of such written notice,

8

the department shall hold a conference and shall, within 15 days

9

thereafter, make a decision on whether to suspend or revoke the

10

well permit or registration. The department shall provide

11

written notice of its decision to revoke to the well operator or

12

its agent, which shall become effective upon receipt thereof and

13

the operator shall immediately plug the well.

14

* * *

15

Section 505.  Penalties.

16

(a)  Any person who violates any provisions of the act is

17

guilty of a summary offense and, upon conviction thereof, shall

18

be sentenced to pay a fine of not more than [$300] $10,000 or

19

undergo imprisonment of not more than 90 days, or both. Each

20

day's continuance of such violation shall be a separate and

21

distinct offense.

22

(b)  Any person who willfully violates any provisions of this

23

act or any order of the department issued pursuant to the

24

provisions of this act is guilty of a misdemeanor and, upon

25

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

26

than [$5,000] $150,000 or undergo imprisonment of not more than

27

one year, or both. Each day's continuance of such violation

28

shall be a separate distinct offense.

29

(c)  The department shall have the authority to institute

30

prosecutions against any person or municipality under this act.

- 28 -

 


1

Section 506.  Civil penalties.

2

In addition to proceeding under any other remedy available at

3

law or in equity for a violation of a provision of this act or a

4

rule or regulation of the department or a permit condition or 

5

any order of the department, the [Environmental Hearing Board]

6

department, after hearing, may assess a civil penalty upon a

7

person for such violation. Such a penalty may be assessed

8

whether or not the violation was willful. The civil penalty so

9

assessed shall not exceed [$25,000, plus $1,000] $100,000, plus

10

$10,500 for each day of continued violation. In determining the

11

amount of the civil penalty, the [board] department shall

12

consider the willfulness of the violation, damage or injury to

13

the natural resources of the Commonwealth or their uses,

14

endangerment of the safety of others, costs of remedying the

15

harm, savings resulting to the person in consequence of such

16

violation and other relevant factors. It shall be payable to the

17

Commonwealth and shall be collectible in any manner provided at

18

law for the collection of debts. If any person liable to pay any

19

such penalty neglects or refuses to pay the same after demand,

20

the amount, together with interest and any costs that may

21

accrue, shall be a lien in favor of the Commonwealth upon the

22

property, both real and personal, of such person but only after

23

same has been entered and docketed of record by the prothonotary

24

of the county where such is situated. The [board] department 

25

may, at any time, transmit to the prothonotaries of the

26

respective counties certified copies of all such liens, and it

27

shall be the duty of each prothonotary to enter and docket the

28

same of record in his office and to index the same as judgments

29

are indexed, without requiring the payment of costs as a

30

condition precedent to the entry thereof.

- 29 -

 


1

Section 9.  The act is amended by adding a chapter to read:

2

CHAPTER 5A

3

EFFECTS OF NATURAL GAS DRILLING

4

Section 5A01.  Definitions.

5

The following words and phrases when used in this chapter

6

shall have the meanings given to them in this section unless the

7

context clearly indicates otherwise:

8

"Accredited laboratory."  A facility engaged in the testing

9

and calibration of scientific measurement devices and certified

10

by the Department of Environmental Protection as having met the

11

department's standards for accreditation.

12

"Association."  A partnership, limited partnership or any

13

other form of unincorporated enterprise owned or conducted by

14

two or more persons.

15

"Base rate."  The rate under section 5A02(b).

16

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

17

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

18

"Corporation."  A corporation, joint stock association,

19

limited liability company, business trust or any other

20

incorporated enterprise organized under the laws of this

21

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

22

foreign country or dependency.

23

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

24

"First responder."  Professional and volunteer fire service

25

personnel, emergency medical personnel, law enforcement

26

personnel or State, county or local emergency management

27

personnel.

28

"Fund."  The Natural Gas Severance Tax Fund established under

29

section 5A28.

30

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

- 30 -

 


1

or liquids past a certain point.

2

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

3

township.

4

"Natural gas."  A fossil fuel consisting of a mixture of

5

hydrocarbon gases, primarily methane, possibly including ethane,

6

propane, butane, pentane, carbon dioxide, oxygen, nitrogen and

7

hydrogen sulfide and other gas species. The term includes

8

natural gas from oil fields known as associated gas or casing

9

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

10

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

11

coal bed methane.

12

"Nonproducing site."  A point of severance that is not

13

capable of producing natural gas in paying quantities.

14

"Paying quantities."  Profit to the producer, however small,

15

over the producer's current operating expenses.

16

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

17

association or other entity, including the Commonwealth, its

18

political subdivisions, instrumentalities and authorities. When

19

the term is used in a clause prescribing and imposing a penalty

20

or imposing a fine or imprisonment, or both, the term shall

21

include the members, as applied to an association, and the

22

officers, as applied to a corporation.

23

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

24

Commonwealth in the business of severing natural gas for sale,

25

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

26

severs natural gas from a storage field.

27

"Producing site."  A point of severance capable of producing

28

natural gas in paying quantities.

29

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

30

severed.

- 31 -

 


1

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

2

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

3

soil or water of this Commonwealth.

4

"Severance."  The extraction or other removal of natural gas

5

from the soil or water of this Commonwealth.

6

"Severing."  Extracting or otherwise removing natural gas

7

from the soil or water of this Commonwealth.

8

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

9

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

10

been injected into the formation or site.

11

"Stripper well."  A producing site or a nonproducing site

12

that is not capable of producing and does not produce more than

13

60,000 cubic feet of natural gas per day.

14

"Tax."  The tax imposed under this chapter.

15

"Tax rate adjustment index."  The amount calculated under

16

section 5A03(c) by which the rate of the tax imposed under

17

section 5A02(b) is adjusted annually.

18

"Taxpayer."  A person subject to the tax imposed by this

19

chapter.

20

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

21

wellhead at a temperature of 60 degrees Fahrenheit and an

22

absolute pressure of 14.73 pounds per square inch in accordance

23

with American Gas Association Standards and according to Boyle's

24

Law for the measurement of gas under varying pressures with

25

deviations as follows:

26

(1)  The average absolute atmospheric pressure shall be

27

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

28

elevation or location of point of delivery above sea level or

29

variations in atmospheric pressure from time to time.

30

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

- 32 -

 


1

be determined by the continuous use of a recording

2

thermometer installed to properly record the temperature of

3

gas flowing through the meters. The arithmetic average of the

4

temperature recorded each 24-hour day shall be used in

5

computing gas volumes. If a recording thermometer is not

6

installed, or is installed and not operating properly, an

7

average flowing temperature of 60 degrees Fahrenheit shall be

8

used in computing gas volume.

9

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

10

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

11

gravity balance, or at intervals as found necessary in

12

practice. Specific gravity determinations shall be used in

13

computing gas volumes.

14

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

15

shall be determined by annual tests or at other shorter

16

intervals as found necessary in practice. The apparatus and

17

method used in making the test shall be in accordance with

18

recommendations of the National Bureau of Standards or Report

19

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

20

Association, or amendments thereto. The results of the tests

21

shall be used in computing the volume of gas delivered under

22

this chapter.

23

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

24

nonproducing site to measure the volume of natural gas severed

25

for which a wellhead meter certification has been issued.

26

"Wellhead meter certification."  A report issued by an

27

accredited laboratory certifying the accuracy of a wellhead

28

meter.

29

Section 5A02.  Imposition of tax.

30

(a)  Establishment.--Beginning July 1, 2011, there shall be 

- 33 -

 


1

levied a natural gas severance tax on every producer. The tax

2

shall not be imposed on units severed from a stripper well

3

unless the following apply:

4

(1)  The stripper well is one of multiple producing sites

5

or nonproducing sites where the combined volumes of gas

6

produced by all of such sites are measured by a single

7

wellhead meter as provided in section 5A06.

8

(2)  The combined volumes of gas produced by all the

9

producing sites or nonproducing sites described in paragraph

10

(1) is more than 60,000 cubic feet of natural gas per day.

11

(a.1)  Exemptions.--The tax shall not be imposed on the

12

following:

13

(1)  Units severed by a producer and sold and delivered

14

to a manufacturer of tangible personal property, as defined

15

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

16

known as the Tax Reform Code of 1971, for the manufacturer's

17

use within this Commonwealth if the units have been severed

18

from one or more producing sites or nonproducing sites on

19

property owned by the manufacturer.

20

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

21

surface under which the gas is severed if the surface owner

22

is the end user of the gas.

23

(b)  Rate.--Subject to the provisions of section 5A03

24

(relating to tax rate adjustment), the rate shall be 24¢ per

25

unit severed at the wellhead.

26

Section 5A03.  Tax rate adjustment.

27

(a)  Annual adjustment.--The tax rate shall be adjusted

28

annually by the amount of the tax rate adjustment index as

29

calculated under subsection (c), provided that the tax rate

30

shall never be less than the base rate. The adjusted tax rate

- 34 -

 


1

shall be effective for the next year.

2

(b)  Determination of adjustment.--On or before April 30 of

3

each year following the effective date of this section, the

4

secretary shall calculate and determine the amount of the tax

5

rate adjustment index.

6

(c)  Calculation of adjustment.--The tax rate adjustment

7

index shall be determined as follows:

8

(1)  If 6% of the average of New York Mercantile Exchange

9

(NYMEX) Henry Hub settled price on the last trading day of

10

the month, as reported by the Wall Street Journal for the

11

previous 12-month period ending March 31, is less than the

12

base rate, the tax rate adjustment index shall be zero and

13

the adjusted tax rate shall be the base rate.

14

(2)  If 6% of the average of the NYMEX Henry Hub settled

15

price on the last trading day of the month, as reported by

16

the Wall Street Journal for the previous 12-month period

17

ending March 31, is greater than the base rate, the tax rate

18

adjustment index shall be 50% of the difference between 6% of

19

the average of the NYMEX Henry Hub settled price on the last

20

trading day of the month, as reported in the Wall Street

21

Journal for the previous 12-month period ending March 31, and

22

the base rate. The adjusted tax rate shall be the resulting

23

tax rate adjustment index plus the base rate.

24

(d)  Publication of adjustment.--The secretary shall forward

25

the amount of the tax rate adjustment index and the adjusted tax

26

rate, as determined under subsection (c), to the Legislative

27

Reference Bureau for publication in the Pennsylvania Bulletin by

28

May 1 of each year and shall simultaneously provide the

29

information to producers by written notice. Failure of the

30

amount of the tax rate adjustment index and the adjusted tax

- 35 -

 


1

rate to be published or provided to producers as required by

2

this subsection shall not affect the effectiveness of the

3

adjusted tax rate under subsection (b).

4

(e)  Discontinuance of data.--If publication of the NYMEX

5

Henry Hub average monthly gas price data is discontinued, the

6

tax rate then in effect shall not be adjusted until a comparable

7

method for determining the tax rate adjustment index is adopted

8

by the General Assembly in legislation.

9

(f)  Other adjustments.--If the base data of the NYMEX Henry

10

Hub average monthly gas price is substantially revised, the

11

secretary shall, when determining the amount of the tax rate

12

adjustment index under subsection (c), make appropriate changes

13

to ensure that the tax rate adjustment index is reasonably

14

consistent with the result which would have been attained had

15

the substantial revision not been made. If the secretary is

16

unable to make reasonable changes sufficient to ensure a

17

consistent result, the tax rate then in effect shall not be

18

adjusted until a comparable method for determining the tax rate

19

adjustment index is adopted by the General Assembly in

20

legislation.

21

Section 5A04.  Return and payment.

22

(a)  Requirement.--Every producer is required to file a

23

return with the department, on a form prescribed by the

24

department, which shall include all of the following:

25

(1)  The number of natural gas units severed by the

26

producer for the reporting period.

27

(2)  The number of producing sites used by the producer

28

for the severance of natural gas in each county and

29

municipality.

30

(3)  The amount of tax due under section 5A02.

- 36 -

 


1

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

2

filed with the department within 15 days following the end of a

3

reporting period.

4

(c)  Deadline.--The tax imposed under section 5A02 is due on

5

the day the return is required to be filed and becomes

6

delinquent if not remitted to the department by that date.

7

Section 5A05.  Natural gas severance tax registration.

8

(a)  Application.--Before a producer severs natural gas in

9

this Commonwealth, the producer shall apply to the department

10

for a natural gas severance tax registration certificate.

11

(a.1)  Application fee.--The department may charge an

12

application fee to cover the administrative costs associated

13

with the application and registration process. If the department

14

charges an application fee, the department shall not issue a

15

registration certificate until the producer has paid the

16

application fee.

17

(a.2)  Declaration.--The producer shall include in its

18

application a declaration of all producing sites and

19

nonproducing sites used by the producer for the severance of

20

natural gas. The declaration shall include copies of wellhead

21

meter certifications for each site. The producer is required to

22

update the declaration when the producer adds or removes a

23

producing site or nonproducing site in this Commonwealth or when

24

there is a change in the status of a producing site or

25

nonproducing site or when the producer uses a different

26

accredited laboratory to issue a wellhead meter certification.

27

The producer shall update the declaration within 30 days after a

28

calendar month in which a change to the declaration occurs.

29

(b)  Issuance.--Except as provided in subsection (c), after

30

the receipt of an application and payment of the fee imposed

- 37 -

 


1

under subsection (a.1), the department shall issue a

2

registration certificate. The registration certificate shall be

3

nonassignable. All registrants shall be required to renew their

4

registration certificates and wellhead meter certifications on a

5

staggered renewal system established by the department. After

6

the initial staggered renewal period, a registration certificate

7

or a wellhead meter certification issued shall be valid for a

8

period of five years.

9

(c)  Refusal, suspension or revocation.--The department may

10

refuse to issue, suspend or revoke a registration certificate if

11

the applicant or registrant has not filed required State tax

12

reports and paid State taxes not subject to a timely perfected

13

administrative or judicial appeal or subject to a duly

14

authorized deferred payment plan. The department shall notify

15

the applicant or registrant of any refusal, suspension or

16

revocation. The notice shall contain a statement that the

17

refusal, suspension or revocation may be made public. The notice

18

shall be made by first class mail. An applicant or registrant

19

aggrieved by the determination of the department may file an

20

appeal under the provisions for administrative appeals in the

21

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

22

of 1971. In the case of a suspension or revocation which is

23

appealed, the registration certificate shall remain valid

24

pending a final outcome of the appeals process. Notwithstanding

25

sections 274, 353(f), 408(b), 603, 702, 802, 904 and 1102 of the

26

Tax Reform Code of 1971 or any other provision of law, if no

27

appeal is taken or if an appeal is taken and denied at the

28

conclusion of the appeal process the department may disclose, by

29

publication or otherwise, the identity of a producer and the

30

fact that the producer's registration certificate has been

- 38 -

 


1

refused, suspended or revoked under this subsection. Disclosure

2

may include the basis for refusal, suspension or revocation.

3

(d)  Violation.--A person severing natural gas in this

4

Commonwealth without holding a valid registration certificate

5

under subsection (b) shall be guilty of a summary offense and

6

shall, upon conviction, be sentenced to pay a fine of not less

7

than $300 nor more than $1,500. In the event the person

8

convicted defaults in the payment of the fine, he shall be

9

sentenced to imprisonment for not less than five days nor more

10

than 30 days. The penalties imposed by this subsection shall be

11

in addition to any other penalties imposed by this chapter. For

12

purposes of this subsection, the severing of natural gas during

13

any calendar day shall constitute a separate violation. The

14

secretary may designate employees of the department to enforce

15

the provisions of this subsection. The employees shall exhibit

16

proof of and be within the scope of the designation when

17

instituting proceedings as provided by the Pennsylvania Rules of

18

Criminal Procedure.

19

(e)  Failure to obtain registration certificate.--Failure to

20

obtain or hold a valid registration certificate does not relieve

21

a person from liability for the tax imposed by this chapter.

22

Section 5A06.  Wellhead meters.

23

(a)  General rule.--Except as provided in subsection (b), a 

24

producer shall provide for and maintain a discrete wellhead

25

meter where natural gas is severed. A producer shall ensure that

26

the wellhead meters are maintained according to industry

27

standards. Any wellhead meter installed after the effective date

28

of this section shall be a digital meter.

29

(b)  Exception.--If a producer has multiple producing sites

30

or nonproducing sites where the combined volumes of gas produced

- 39 -

 


1

by all of such sites are measured by a single wellhead meter,

2

the producer shall not be required to provide for a discrete

3

wellhead meter at any of those producing sites or nonproducing

4

sites that is also a stripper well.

5

Section 5A07.  Assessments.

6

(a)  Authorization and requirement.--The department is

7

authorized and shall make the inquiries, determinations and

8

assessments of the tax imposed under this chapter, including

9

interest, additions and penalties imposed under this chapter.

10

(b)  Notice.--The notice of assessment and demand for payment

11

shall be mailed to the taxpayer. The notice shall set forth the

12

basis of the assessment. The department shall send the notice of

13

assessment to the taxpayer at its registered address via

14

certified mail if the assessment increases the taxpayer's tax

15

liability by $300. Otherwise, the notice of assessment may be

16

sent via regular mail.

17

Section 5A08.  Time for assessment.

18

(a)  Requirement.--An assessment as provided under section

19

5A07 shall be made within three years after the date when the

20

return provided for by section 5A04 is filed or the end of the

21

year in which the tax liability arises, whichever shall occur

22

last. For the purposes of this subsection and subsection (b), a

23

return filed before the last day prescribed for the filing

24

period shall be considered as filed on the last day.

25

(b)  Exception.--If the taxpayer underpays the correct amount

26

of the tax due by 25% or more, the assessment shall be made

27

within six years after the date the return was filed.

28

(c)  Intent to evade.--Where no return is filed or where the

29

taxpayer files a false or fraudulent return with intent to evade

30

the tax imposed by this chapter, the assessment may be made at

- 40 -

 


1

any time.

2

(d)  Erroneous credit or refund.--Within three years of the

3

granting of a refund or credit or within the period in which an

4

assessment or reassessment may have been issued by the

5

department for the taxable period for which the refund was

6

granted, whichever period shall last occur, the department may

7

issue an assessment to recover a refund or credit made or

8

allowed erroneously.

9

Section 5A09.  Extension of assessment period.

10

Notwithstanding the provisions of this chapter, the

11

assessment period may be extended in the event a taxpayer has

12

provided written consent before the expiration of the period

13

provided in section 5A08 for a tax assessment. The amount of tax

14

due may be assessed at any time within the extended period. The

15

period may be extended further by subsequent written consents

16

made before the expiration of the extended period.

17

Section 5A10.  Reassessments.

18

A taxpayer against whom an assessment is made may petition

19

the department for a reassessment under Article XXVII of the act

20

of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of

21

1971.

22

Section 5A11.  Interest.

23

The department shall assess interest on any delinquent tax at

24

the rate prescribed under section 806 of the act of April 9,

25

1929 (P.L.343, No.176), known as The Fiscal Code.

26

Section 5A12.  Penalties.

27

The department shall enforce the following penalties:

28

(1)  A penalty against a producer without a natural gas

29

severance tax registration certificate. The penalty shall be

30

$1 for every unit severed without a valid registration 

- 41 -

 


1

certificate. The department may assess this penalty

2

separately from or in conjunction with any assessment of the

3

natural gas severance tax.

4

(2)  A penalty against a producer for failure to timely

5

file a return as required under section 5A04. The penalty

6

shall be 5% of the tax liability to be reported on the return

7

for each day beyond the due date that the return is not

8

filed.

9

(3)  In addition to the penalty under paragraph (2), a

10

penalty against the producer for a willful failure to timely

11

file a return. The penalty shall be 200% of the tax liability

12

required to be reported on the return.

13

(4)  A penalty against a producer for failure to timely

14

pay the tax as required by section 5A04(c). The penalty shall

15

be 5% of the amount of tax due for each day beyond the

16

payment date that the tax is not paid.

17

Section 5A13.  Criminal acts.

18

(a)  Fraudulent return.--Any person with intent to defraud

19

the Commonwealth, who willfully makes or causes to be made a

20

return required by this chapter which is false, is guilty of a

21

misdemeanor and shall, upon conviction, be sentenced to pay a

22

fine of not more than $2,000 or to imprisonment for not more

23

than three years, or both.

24

(b)  Other crimes.--

25

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

26

person is guilty of a misdemeanor and shall, upon conviction,

27

be sentenced to pay a fine of not more than $1,000 and costs

28

of prosecution or to imprisonment for not more than one year,

29

or both, for any of the following:

30

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

- 42 -

 


1

department.

2

(ii)  Willfully failing or neglecting to timely file

3

a return or report required by this chapter.

4

(iii)  Refusing to timely pay a tax, penalty or

5

interest imposed or provided for by this chapter.

6

(iv)  Willfully failing to preserve its books, papers

7

and records as directed by the department.

8

(v)  Refusing to permit the department or its

9

authorized agents to examine its books, records or

10

papers.

11

(vi)  Knowingly making any incomplete, false or

12

fraudulent return or report.

13

(vii)  Preventing or attempting to prevent the full

14

disclosure of the amount of natural gas severance tax

15

due.

16

(viii)  Providing any person with a false statement

17

as to the payment of the tax imposed under this chapter

18

with respect to any pertinent facts.

19

(ix)  Making, uttering or issuing a false or

20

fraudulent statement.

21

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

22

addition to other penalties imposed by this chapter.

23

Section 5A14. Abatement of additions or penalties.

24

Upon the filing of a petition for reassessment or a petition

25

for refund by a taxpayer as provided under this chapter,

26

additions or penalties imposed upon the taxpayer by this chapter

27

may be waived or abated in whole or in part where the petitioner

28

establishes that he acted in good faith, without negligence and

29

with no intent to defraud.

30

Section 5A15.  Bulk and auction sales.

- 43 -

 


1

A person that sells or causes to be sold at auction, or that

2

sells or transfers in bulk, 51% or more of a stock of goods,

3

wares or merchandise of any kind, fixtures, machinery,

4

equipment, buildings or real estate involved in a business for

5

which the person holds a registration certificate or is required

6

to obtain a registration certificate under the provisions of

7

this chapter shall be subject to the provisions of section 1403

8

of the act of April 9, 1929 (P.L.343, No.176), known as The

9

Fiscal Code.

10

Section 5A16.  Collection upon failure to request reassessment,

11

review or appeal.

12

(a)  Power of department.--The department may collect the tax 

13

imposed under this chapter:

14

(1)  If an assessment of the tax is not paid within 30

15

days after notice to the taxpayer when no petition for

16

reassessment has been filed.

17

(2)  Within 60 days of the reassessment, if no petition

18

for review has been filed.

19

(3)  If no appeal has been made, within 30 days of:

20

(i)  the Board of Finance and Revenue's decision of a

21

petition for review; or

22

(ii)  the expiration of the board's time for acting

23

upon the petition.

24

(4)  In all cases of judicial sales, receiverships,

25

assignments or bankruptcies.

26

(b)  Prohibition.--In a case for the collection of taxes

27

under subsection (a), the taxpayer against whom they were

28

assessed shall not be permitted to set up a ground of defense

29

that might have been determined by the department, the Board of

30

Finance and Revenue or the courts, provided that the defense of

- 44 -

 


1

failure of the department to mail notice of assessment or

2

reassessment to the taxpayer and the defense of payment of

3

assessment or reassessment may be raised in proceedings for

4

collection by a motion to stay the proceedings.

5

Section 5A17.  Tax liens.

6

(a)  Lien imposed.--If any taxpayer neglects or refuses to

7

pay the tax imposed under this chapter for which the taxpayer is

8

liable under this chapter after demand, the amount, including

9

interest, addition or penalty, together with additional costs

10

that may accrue, shall be a lien in favor of the Commonwealth

11

upon the real and personal property of the taxpayer but only

12

after the same has been entered and docketed of record by the

13

prothonotary of the county where the property is situated. The

14

department may, at any time, transmit to the prothonotaries of

15

the respective counties certified copies of all liens imposed by

16

this section. It shall be the duty of the prothonotary receiving

17

the lien to enter and docket the same of record to the office of

18

the prothonotary. The lien shall be indexed as judgments are now

19

indexed. No prothonotary shall require as a condition precedent

20

to the entry of the lien the payment of costs incidental to its

21

entry.

22

(b)  Priority of lien and effect on judicial sale.--Except

23

for the costs of the sale and the writ upon which the sale was

24

made and real estate taxes and municipal claims against the

25

property, a lien imposed under this section shall have priority

26

from the date of its recording and shall be fully paid and

27

satisfied out of the proceeds of any judicial sale of property

28

subject to the lien, before any other obligation, judgment,

29

claim, lien or estate to which the property may subsequently

30

become subject, but shall be subordinate to mortgages and other

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1

liens existing and duly recorded or entered of record prior to

2

the recording of the lien.

3

(c)  No discharge by sale on junior lien.--In the case of a

4

judicial sale of property subject to a lien imposed under this

5

section, upon a lien or claim over which the lien imposed under

6

this section has priority, the sale shall discharge the lien

7

imposed under this section to the extent only that the proceeds

8

are applied to its payment, and the lien shall continue in full

9

force and effect as to the balance remaining unpaid. There shall

10

be no inquisition or condemnation upon any judicial sale of real

11

estate made by the Commonwealth under the provisions of this

12

chapter. The lien shall continue as provided in the act of April

13

9, 1929 (P.L.343, No.176), known as The Fiscal Code, and a writ

14

of execution may directly issue upon the lien without the

15

issuance and prosecution to judgment of a writ of scire facias,

16

provided that not less than ten days before issuance of any

17

execution on the lien, notice of the filing and the effect of

18

the lien shall be sent by registered mail to the taxpayer at its

19

last known post office address, provided further that the lien

20

shall have no effect upon any stock of goods, wares or

21

merchandise regularly sold or leased in the ordinary course of

22

business by the taxpayer against whom the lien has been entered,

23

unless and until a writ of execution has been issued and a levy

24

made upon the stock of goods, wares and merchandise.

25

(d)  Duty of prothonotary.--Any willful failure of any

26

prothonotary to carry out any duty imposed upon him by this

27

section shall be a misdemeanor. Upon conviction, he shall be

28

sentenced to pay a fine of not more than $1,000 and costs of

29

prosecution or to imprisonment for not more than one year, or

30

both.

- 46 -

 


1

(e)  Priority.--Except as provided in this chapter, the

2

distribution, voluntary or compulsory, in receivership,

3

bankruptcy or otherwise of the property or estate of any person,

4

all taxes imposed by this chapter which are due and unpaid and

5

are not collectible under the provisions of section 225 of the

6

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

7

of 1971, shall be paid from the first money available for

8

distribution in priority to all other claims and liens, except

9

as the laws of the United States may give priority to a claim to

10

the Federal Government. A person charged with the administration

11

or distribution of the property or estate who violates the

12

provisions of this section shall be personally liable for the

13

taxes imposed by this chapter which are accrued and unpaid and

14

chargeable against the person whose property or estate is being

15

administered or distributed.

16

(f)  Other remedies.--Subject to the limitations contained in

17

this chapter as to the assessment of taxes, nothing contained in

18

this section shall be construed to restrict, prohibit or limit

19

the use by the department in collecting taxes due and payable of

20

another remedy or procedure available at law or equity for the

21

collection of debts.

22

Section 5A18.  Tax suit reciprocity.

23

The courts of this Commonwealth shall recognize and enforce

24

liabilities for natural gas severance or extraction taxes

25

lawfully imposed by any other state, provided that the other

26

state recognizes and enforces the tax imposed under this

27

chapter.

28

Section 5A19.  Service.

29

A producer is deemed to have appointed the Secretary of the

30

Commonwealth its agent for the acceptance of service of process

- 47 -

 


1

or notice in a proceeding for the enforcement of the civil

2

provisions of this chapter and service made upon the Secretary

3

of the Commonwealth as agent shall be of the same legal force

4

and validity as if the service had been personally made upon the

5

producer. Where service cannot be made upon the producer in the

6

manner provided by other laws of this Commonwealth relating to

7

service of process, service may be made upon the Secretary of

8

the Commonwealth. In that case, a copy of the process or notice

9

shall be personally served upon any agent or representative of

10

the producer who may be found within this Commonwealth or, where

11

no agent or representative may be found, a copy of the process

12

or notice shall be sent via registered mail to the producer at

13

the last known address of its principal place of business, home

14

office or residence.

15

Section 5A20.  Refunds.

16

The department shall refund all taxes, interest and penalties

17

paid to the Commonwealth under the provisions of this chapter to

18

which the Commonwealth is not rightfully entitled. The refunds

19

shall be made in accordance with section 3003.1 of the act of

20

March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of

21

1971, to the person or the person's heirs, successors, assigns

22

or other personal representatives who paid the tax. No refund

23

shall be made under this section regarding a payment made by

24

reason of an assessment where a taxpayer filed a petition for

25

reassessment under section 2702 of the Tax Reform Code of 1971

26

which was denied and is no longer subject to further review or

27

appeal. Nothing in this chapter shall prohibit a taxpayer who

28

has filed a timely petition for reassessment from amending it to

29

a petition for refund where the petitioner paid the tax

30

assessed.

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1

Section 5A21.  Refund petition.

2

(a)  General rule.--Except as provided for in subsection (b),

3

the refund or credit of tax, interest or penalty provided for by

4

section 5A20 shall be made only where the person who has paid

5

the tax files a petition for refund with the department under

6

section 3003.1 of the Tax Reform Code of 1971.

7

(b)  Natural gas severance tax.--A refund or credit of tax,

8

interest or penalty paid as a result of an assessment made by

9

the department under section 5A05 shall be made only where the

10

person who has paid the tax files with the department a petition

11

for a refund with the department under Article XXVII of the Tax

12

Reform Code of 1971 within the time limits of section 3003.1 of

13

the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform

14

Code of 1971. The filing of a petition for refund, under the

15

provisions of this subsection, shall not affect the abatement of

16

interest, additions or penalties to which the person may be

17

entitled by reason of his payment of the assessment.

18

Section 5A22.  Rules and regulations.

19

The department is charged with the enforcement of the

20

provisions of this chapter and is authorized and empowered to

21

prescribe, adopt, promulgate and enforce rules and regulations

22

not inconsistent with the provisions of this chapter relating to

23

any matter or thing pertaining to the administration and

24

enforcement of the provisions of this chapter and the collection

25

of taxes, penalties and interest imposed by this chapter. The

26

department may prescribe the extent, if any, to which any of the

27

rules and regulations shall be applied without retroactive

28

effect.

29

Section 5A23.  Recordkeeping.

30

(a)  General rule.--Every person liable for any tax imposed

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1

by this chapter, or for the collection of the tax, shall keep

2

records, including those enumerated in subsection (a.1), render

3

statements, make returns and comply with the rules and

4

regulations as the department may prescribe regarding matters

5

pertinent to the person's business. Whenever it is necessary,

6

the department may require a person, by notice served upon the

7

person or by regulations, to make returns, render statements or

8

keep records as the department deems sufficient to show whether

9

or not a person is liable to pay tax under this chapter.

10

(a.1)  Records.--Records to be maintained are:

11

(1)  Wellhead meter charts for each reporting period and

12

the meter calibration and maintenance records. If turbine

13

meters are in use, the maintenance records will be made

14

available to the department upon request.

15

(2)  Records, statements and other instruments furnished

16

to a producer by a person to whom the producer delivers for

17

sale, transport or delivery of natural gas.

18

(3)  Records, statements and other instruments as the

19

department may prescribe by regulation.

20

(b)  Records of nonresidents.--A nonresident who does

21

business in this Commonwealth as a producer shall keep adequate

22

records of the business and of the tax due as a result. The

23

records shall be retained within this Commonwealth unless

24

retention outside this Commonwealth is authorized by the

25

department. The department may require a taxpayer who desires to

26

retain records outside this Commonwealth to assume reasonable

27

out-of-State audit expenses.

28

(c)  Keeping of separate records.--A producer who is engaged

29

in another business or businesses which do not involve the

30

severing of natural gas taxable under this chapter shall keep

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1

separate books and records of the businesses so as to show the

2

taxable severing of natural gas under this chapter separately

3

from other business activities not taxable hereunder. If any

4

person fails to keep separate books and records, the person

5

shall be liable for a penalty equaling 100% of tax due under

6

this chapter for the period where separate records were not

7

maintained.

8

Section 5A24.  Examinations.

9

The department or any of its authorized agents are authorized

10

to examine the books, papers and records of any taxpayer in

11

order to verify the accuracy and completeness of any return made

12

or, if no return was made, to ascertain and assess the tax

13

imposed by this chapter. The department may require the

14

preservation of all books, papers and records for any period

15

deemed proper by it but not to exceed three years from the end

16

of the calendar year to which the records relate. Every taxpayer

17

is required to give to the department or its agent the means,

18

facilities and opportunity for examinations and investigation

19

under this section. The department is further authorized to

20

examine any person, under oath, concerning the taxable severing

21

of natural gas by any taxpayer or concerning any other matter

22

relating to the enforcement or administration of this chapter,

23

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

24

records and the attendance of all persons whether as parties or

25

witnesses whom it believes to have knowledge of relevant

26

matters. The procedure for the hearings or examinations shall be

27

the same as that provided by the act of April 9, 1929 (P.L.343,

28

No. 176), known as The Fiscal Code.

29

Section 5A25.  Unauthorized disclosure.

30

Any information gained by the department as a result of any

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1

return, examination, investigation, hearing or verification

2

required or authorized by this chapter shall be confidential

3

except for official purposes and except in accordance with

4

proper judicial order or as otherwise provided by law, and any

5

person unlawfully divulging the information shall be guilty of a

6

misdemeanor and shall, upon conviction, be sentenced to pay a

7

fine of not more than $1,000 and costs of prosecution or to

8

imprisonment for not more than one year, or both.

9

Section 5A26.  Cooperation with other governments.

10

Notwithstanding the provisions of section 5A18, the

11

department may permit the Commissioner of the Internal Revenue

12

Service of the United States, the proper officer of any state or

13

the authorized representative of either of them to inspect the

14

tax returns of any taxpayer, or may furnish to the commissioner

15

or officer or to either of their authorized representative an

16

abstract of the return of any taxpayer, or supply him with

17

information concerning any item contained in any return or

18

disclosed by the report of any examination or investigation of

19

the return of any taxpayer. This permission shall be granted

20

only if the laws of the United States or another state grant

21

substantially similar privileges to the proper officer of the

22

Commonwealth charged with the administration of this chapter.

23

Section 5A27.  Bonds.

24

(a)  Taxpayer to file bond.--The department may require a

25

nonresident natural person or any foreign corporation,

26

association, fiduciary or other entity, not authorized to do

27

business within this Commonwealth or not having an established

28

place of business in this Commonwealth and subject to the tax

29

imposed by section 5A02, to file a bond issued by a surety

30

company authorized to do business in this Commonwealth and

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1

approved by the Insurance Commissioner as to solvency and

2

responsibility, in amounts as it may fix, to secure the payment

3

of any tax or penalties due or which may become due from a

4

nonresident natural person, corporation, association, fiduciary

5

or other entity whenever it deems it necessary to protect the

6

revenues obtained under this chapter. The department may also

7

require a bond of a person petitioning the department for

8

reassessment in the case of any assessment over $500 or where,

9

in its opinion, the ultimate collection is in jeopardy. For a

10

period of three years, the department may require a bond of any

11

person who has, on three or more occasions within a 12-month

12

period, either filed a return or made payment to the department

13

more than 30 days late. In the event the department determines a

14

taxpayer is required to file a bond, it shall give notice to the

15

taxpayer specifying the amount of the bond required. The

16

taxpayer shall file the bond within five days after notice is

17

given by the department unless, within five days, the taxpayer

18

shall request in writing a hearing before the secretary or his

19

representative. At the hearing, the necessity, propriety and

20

amount of the bond shall be determined by the secretary or the

21

secretary's representative. The determination shall be final and

22

the taxpayer shall comply with it within 15 days after notice is

23

mailed to the taxpayer.

24

(b)  Securities in lieu of bond.--In lieu of the bond

25

required by this section, securities approved by the department

26

or cash in a prescribed amount may be deposited. The securities

27

or cash shall be kept in the custody of the department. The

28

department may apply the securities or cash to the tax imposed

29

by this chapter and interest or penalties due without notice to

30

the depositor. The securities may be sold by the department to

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1

pay the tax and/or interest or penalties due at public or

2

private sale upon five days' written notice to the depositor.

3

(c)  Failure to file bond.--The department may file a lien

4

under section 5A17 against any taxpayer who fails to file a bond

5

when required to do so under this section. All funds received

6

upon execution of the judgment on the lien shall be refunded to

7

the taxpayer with 3% interest, should a final determination be

8

made that it does not owe any payment to the department.

9

Section 5A28.  Funds and accounts established.

10

(a)  Natural Gas Severance Tax Fund.--

11

(1)  The Natural Gas Severance Tax Fund is established as

12

a restricted account within the General Fund.

13

(2)  The proceeds of the tax imposed under section 5A02

14

and penalties and interest imposed under this chapter, less

15

the amounts transferred to the department under section 5A32,

16

shall be deposited into the fund.

17

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

18

accordance with sections 5A29 and 5A30.

19

(b)  Local Government Services Account.--The Local Government

20

Services Account is established as a restricted account within

21

the fund.

22

(c)  Oil and Gas Emergency Response Account.--The Oil and Gas

23

Emergency Response Account is established as a restricted

24

account within the fund.

25

Section 5A29.  Transfers and distributions.

26

The State Treasurer shall make the following distributions

27

from the money deposited into the fund at the end of each month

28

as follows:

29

(1)  Thirty percent to the Local Government Services

30

Account established under 5A28(b) and shall be distributed as

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1

provided in section 5A30.

2

(2)  Thirty percent to the Environmental Stewardship Fund

3

established under 27 Pa.C.S. § 6104 (relating to fund).

4

(3)  Thirty percent to the Hazardous Sites Cleanup Fund

5

established under section 901 of the act of October 18, 1988

6

(P.L.756, No.108), known as the Hazardous Sites Cleanup Act.

7

(4)  Ten percent, but not more than $11,000,000 per

8

fiscal year, to the Oil and Gas Emergency Response Account

9

established under 5A28(c), and shall be distributed as

10

provided in section 5A31. In the event more than $11,000,000

11

is collected in any fiscal year the excess proceeds shall be

12

distributed equally among paragraphs (1), (2) and (3).

13

Section 5A30.  Distributions from local government services

14

account.

15

(a)  Quarterly distributions.--On the last business day of

16

each period of three calendar months, the State Treasurer shall

17

make the following distributions from the money in the Local

18

Government Services Account:

19

(1)  Fifty percent shall be distributed as follows:

20

(i)  Thirty-five percent to counties with producing

21

sites to be used as provided in subsection (c). The money

22

under this subparagraph shall be distributed to each

23

eligible county based on the following formula:

24

(A)  Divide:

25

(I)  the number of producing sites in the

26

county; by

27

(II)  the total number of producing sites in

28

all the counties in this Commonwealth.

29

(B)  Multiply:

30

(I)  the quotient under clause (A); by

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1

(II)  the amount of money available for

2

distribution under this subparagraph.

3

(ii)  Fifty percent to municipalities with producing

4

sites. The money under this subparagraph shall be

5

distributed to each eligible municipality based on the

6

following formula:

7

(A)  Divide:

8

(II)  the number of producing sites in the

9

municipality; by

10

(II)  the total number of producing sites in

11

all municipalities in this Commonwealth.

12

(B)  Multiply:

13

(I)  the quotient under clause (A); by

14

(II)  the amount of money available for

15

distribution under this clause.

16

(C)  The amount distributed to a municipality

17

shall not exceed 50% of the municipality's total

18

budget for fiscal year 2010-2011, adjusted for

19

inflation in subsequent years by an amount not to

20

exceed an annual cost-of-living adjustment calculated

21

by applying the Annual Percent Change in the Consumer

22

Price Index for all Urban Consumers immediately prior

23

to the date the adjustment is due to take effect. The

24

amount distributed under this clause shall be used

25

for the following purposes:

26

(I)  Reconstruction, maintenance and repair

27

of municipal roadways and bridges, which the

28

municipality has determined have been or are

29

being used extensively to transport natural gas

30

or equipment related to the production of natural

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1

gas.

2

(II)  Preservation and improvement of

3

municipal water supplies.

4

(III)  Maintenance and capital improvements

5

to municipal waste and sewage systems.

6

(IV)  Preservation and reclamation of the

7

surface waters of the municipality.

8

(V)  Other lawful purposes reasonably related

9

to the health, welfare and safety consequences of

10

severing natural gas in the municipality.

11

Any funds not distributed to the municipalities in a

12

county because of the budgetary limitations under

13

clause (A) shall be distributed to the county to be

14

used solely for grants to municipalities to defer the

15

cost of regional cooperation endeavors undertaken by

16

the municipalities within the county.

17

(iii)  Fifteen percent to municipalities with no

18

producing sites located in a county with producing sites.

19

The money under this subparagraph shall be distributed to

20

each eligible municipality based on the following

21

formula:

22

(A)  Divide:

23

(I)  the number of producing sites in the

24

county; by

25

(II)  the total number of producing sites in

26

all counties in this Commonwealth.

27

(B)  Multiply:

28

(I)  the quotient under clause (A); by

29

(II)  the amount of money available for

30

distribution under this clause.

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1

(C)  The State Treasurer shall distribute an

2

equal share to each eligible municipality within the

3

same county. The amount distributed to a municipality

4

shall not exceed 50% of the municipality's total

5

budget for fiscal year 2010-2011, adjusted for

6

inflation in subsequent years by an amount not to

7

exceed an annual cost-of-living adjustment calculated

8

by applying the Annual Percent Change in the Consumer

9

Price Index for all Urban Consumers immediately prior

10

to the date the adjustment is due to take effect and

11

shall be used for the following purposes:

12

(I)  Reconstruction, maintenance and repair

13

of municipal roadways and bridges, which the

14

municipality has determined have been, or are

15

being, used extensively to transport natural gas

16

or equipment related to the production of natural

17

gas.

18

(II)  Preservation and improvement of

19

municipal water supplies.

20

(III)  Maintenance and capital improvements

21

to municipal waste and sewage systems.

22

(IV)  Preservation and reclamation of surface

23

waters of the municipality.

24

(V)  Other lawful purposes reasonably related

25

to the health, welfare and safety consequences of

26

severing natural gas in municipalities within the

27

county.

28

Any funds not distributed to the municipalities in a

29

county because of the budgetary limitations under

30

clause (B) shall be distributed to the county to be

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1

used solely for grants to municipalities to defer the

2

cost of regional cooperation endeavors undertaken by

3

the municipalities within the county.

4

(2)  Fifty percent shall be distributed to the

5

Commonwealth Financing Authority to fund eligible projects

6

under 64 Pa.C.S. § 1551 (relating to Business in Our Sites

7

Program).

8

(b)  Limitations.--Only producing sites and nonproducing

9

sites on which the tax is levied under section 5A02(a) during

10

the three-month period for which transfers and distributions are

11

made shall be included in any of the calculations made under

12

subsection (a) for that three-month period.

13

(c)  Administration of funds by counties.--

14

(1)  The governing body of each county receiving

15

distributions under subsection (a)(1)(i) shall administer the

16

funds received. The governing body shall give priority to the

17

reconstruction, repair and maintenance of county roadways and

18

bridges, which the governing body has determined have been or

19

are being used to transport natural gas or equipment related

20

to the production of natural gas. A simple majority vote of

21

all of the members of the governing body shall be required

22

for any action under this paragraph.

23

(2)  The Department of Community and Economic Development

24

shall have the authority to audit a county's use of such

25

funds and each county receiving funds shall make their

26

financial records and other documents relating to its use of

27

funds available to the Department of Community and Economical

28

Development.

29

(d)  Administration of funds by municipalities.--

30

(1)  The governing body of a municipality receiving

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1

distributions under subsection (a)(2) or (3) shall administer

2

the funds received.

3

(2)  The Department of Community and Economic Development

4

shall have the authority to audit a municipality's use of the

5

funds. Each municipality receiving funds shall make financial

6

records and other documents relating to its use of the funds

7

available to the Department of Community and Economic

8

Development.

9

(f)  Administration.--The department shall make the

10

calculations required for the transfers and distributions under

11

this section and shall submit the calculations to the State

12

Treasurer in sufficient time for the State Treasurer to make the

13

transfers and distributions as required by this section.

14

Section 5A31.  Distributions from the Oil and Gas Emergency

15

Response Account.

16

(a)  Well emergency response and grant program.--One million

17

dollars shall be distributed to the Office of the State Fire

18

Commission for the development of a training program for oil and

19

gas well emergency response, for oil and gas well emergency

20

response training of first responders and for the administration

21

of the grant program under subsection (b).

22

(b)  Purchase or repair of equipment.--Ten million dollars

23

shall be distributed to the Office of the State Fire

24

Commissioner for a grant program for the purchase or repair of

25

equipment necessary for oil and gas well emergency response by

26

first responders. Only first responders in counties with

27

producing sites shall be eligible for grants under this section.

28

Section 5A32.  Administration of costs.

29

Annually, the State Treasurer shall transfer from the fund an

30

amount not to exceed $3,000,000 to the department to be used for

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1

costs associated with the enforcement or administration of this

2

chapter.

3

Section 10.  Sections 601(a) and 602 of the act, amended July

4

2, 1992 (P.L.365, No.78), are amended to read:

5

Section 601.  Well plugging funds.

6

(a)  All fines, civil penalties, permit and registration fees

7

collected under this act are hereby appropriated to the

8

Department of Environmental [Resources] Protection to carry out

9

the purposes of this act.

10

* * *

11

Section 602.  Local ordinances.

12

Except with respect to ordinances adopted pursuant to the act

13

of July 31, 1968 (P.L.805, No.247), known as the Pennsylvania

14

Municipalities Planning Code, [and], the act of October 4, 1978

15

(P.L.851, No.166), known as the Flood Plain Management Act, and

16

the act of March 31, 1927 (P.L.98, No.69), referred to as the

17

Second Class City Zoning Law, all local ordinances and

18

enactments purporting to regulate oil and gas well operations

19

regulated by this act are hereby preempted and superseded to the

20

extent the ordinances and enactments regulate the method of oil

21

and gas well operations. No ordinances or enactments adopted

22

pursuant to the aforementioned acts shall contain provisions

23

which impose conditions, requirements or limitations on the

24

[same features] method of oil and gas well operations regulated

25

by this act or that accomplish the same purposes as set forth in

26

this act. [The Commonwealth, by this enactment, hereby preempts

27

and supersedes the regulation of oil and gas wells as herein

28

defined.] Nothing in this act shall affect the traditional power

29

of local government to regulate zoning and land development of

30

oil and gas activities as well as other aspects, such as the

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1

time and the place of operations to protect the health, safety

2

and welfare of the general public through local ordinances and

3

enactments.

4

Section 11.  The act is amended by adding a section to read:

5

Section 604.1.  Moratorium.

6

(a)  Notwithstanding any other provision of law, there is

7

hereby established a moratorium on the new leasing and the

8

issuance of new well permits under this act for any State forest

9

land not under a lease agreement by September 1, 2010, for the

10

natural gas drilling on State forest lands in the Marcellus

11

Shale formation in this Commonwealth. The purpose of the

12

moratorium shall be to provide additional time to review the

13

permitting process and guidelines and regulations to protect the

14

public land, health and safety.

15

(b)  The moratorium shall expire two years after the

16

effective date of this section.

17

Section 12.  This act shall take effect in 60 days.

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