H.B. 58 Enrolled

OIL AND GAS SEVERANCE TAX AMENDMENTS
1998 GENERAL SESSION
STATE OF UTAH
Sponsor: Beverly Ann Evans
AN ACT RELATING TO THE OIL AND GAS SEVERANCE TAX; EXTENDING THE TAX
CREDIT FOR RECOMPLETIONS AND WORKOVERS UNTIL DECEMBER 31, 2004;
EXTENDING ANNUAL DEPOSITS OF TAXES INTO THE UINTA BASIN
REVITALIZATION FUND UNTIL DECEMBER 31, 2004; REQUIRING THE TAX REVIEW
COMMISSION TO STUDY THE OIL AND GAS SEVERANCE TAX AND REPORT ITS
FINDINGS AND RECOMMENDATIONS TO THE REVENUE AND TAXATION INTERIM
COMMITTEE; AND MAKING TECHNICAL CHANGES.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
59-5-102, as last amended by Chapter 271, Laws of Utah 1996
59-5-116, as enacted by Chapter 341, Laws of Utah 1995
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 59-5-102 is amended to read:
59-5-102. Severance tax -- Rate -- Computation -- Annual exemption -- Study by Tax
Review Commission.
(1) (a) Each person owning an interest, working interest, royalty interest, payments out of
production, or any other interest, in oil or gas produced from a well in the state, or in the proceeds
of the production, shall pay to the state a severance tax equal to 4% of the value, at the well, of the
oil or gas produced, saved, and sold or transported from the field where the substance was
produced.
(b) Beginning January 1, 1992, the severance tax rate for oil is as follows:
(i) 3% of the value up to and including the first $13 per barrel for oil; and
(ii) 5% of the value from $13.01 and above per barrel for oil.
(c) Beginning January 1, 1992, the severance tax rate for natural gas is as follows:
(i) 3% of the value up to and including the first $1.50 per MCF for gas; and

(ii) 5% of the value from $1.51 and above per MCF for gas.
(d) Beginning January 1, 1992, the severance tax rate for natural gas liquids is 4% of the
taxable value for natural gas liquids.
(e) If the oil or gas is shipped outside the state, this constitutes a sale, and the oil or gas is
subject to the severance tax.
(f) If the oil or gas is stockpiled, the tax is not applicable until it is sold, transported, or
delivered. However, oil or gas that is stockpiled for more than two years is subject to the severance
tax.
(2) No tax is imposed upon:
(a) the first $50,000 annually in gross value of each well or wells as defined in this part, to
be prorated among the owners in proportion to their respective interests in the production or in the
proceeds of the production;
(b) stripper wells, unless the exemption prevents the severance tax from being treated as a
deduction for federal tax purposes;
(c) the first six months of production for wells started after January 1, 1984, but before
January 1, 1990;
(d) the first 12 months of production for wildcat wells started after January 1, 1990; or
(e) the first six months of production for development wells started after January 1, 1990.
(3) (a) [A] Through December 31, 2004, a working interest owner who pays for all or part
of the expenses of a recompletion or workover is entitled to a tax credit equal to 20% of the amount
paid.
(b) The tax credit for each recompletion or workover may not exceed [$50,000 per well
during each calendar year through December 31, 1994, and beginning January 1, 1995,] $30,000 per
well during each calendar year [through December 31, 1999]. The tax credit shall apply to the
taxable year in which the recompletion or workover is completed and shall be claimed quarterly
beginning on the third quarter after recompletion or workover is completed under rules made by the
commission.
[(c) Subsection (3) shall terminate at midnight on December 31, 1999.]

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(4) A 50% reduction in the tax rate is imposed upon the incremental production achieved
from an enhanced recovery project.
(5) These taxes are in addition to all other taxes provided by law and are delinquent, unless
otherwise deferred, on June 1 next succeeding the calendar year when the oil or gas is produced,
saved, and sold or transported from the premises.
(6) With respect to the tax imposed by this chapter on each owner of oil or gas or in the
proceeds of the production of those substances produced in the state, each owner is liable for the tax
in proportion to the owner's interest in the production or in the proceeds of the production.
(7) The tax shall be reported and paid by each producer who takes oil or gas in kind pursuant
to agreement on behalf of the producer and on behalf of each owner entitled to participate in the oil
or gas sold by the producer or transported by the producer from the field where the oil or gas is
produced.
(8) Each producer shall deduct the tax from the amounts due to other owners for the
production or the proceeds of the production.
(9) (a) The Tax Review Commission shall review the tax provided for in this part on or
before the October 2002 interim meeting.
(b) The Tax Review Commission shall address in its review the following statutory
provisions:
(i) the severance tax rate structure provided for in this section;
(ii) the exemptions provided for in Subsection (2);
(iii) the credit provided for in Subsection (3), including:
(A) the cost of the credit;
(B) the purpose and effectiveness of the credit; and
(C) whether the credit benefits the state;
(iv) the tax rate reduction provided for in Subsection (4);
(v) other statutory provisions or issues as determined by the Tax Review Commission; and
(vi) whether the statutory provisions the Tax Review Commission reviews under this
Subsection (9) should be:

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(A) continued;
(B) modified; or
(C) repealed.
(c) The Tax Review Commission shall report its findings and recommendations regarding
the tax provided for in this part to the Revenue and Taxation Interim Committee on or before the
November 2002 interim meeting.
Section 2. Section 59-5-116 is amended to read:
59-5-116. Disposition of certain taxes collected on Ute Indian land.
(1) Except as provided in Subsection (2), commencing July 1, 1996, there shall be deposited
into the Uintah Basin Revitalization Fund established in Section 9-10-102 :
(a) 33% of taxes imposed and collected under Section 59-5-102 from all wells existing on
or before June 30, 1995, producing from oil and gas or other hydrocarbon substances attributable
to interests:
(i) held in trust by the United States for the Tribe and its members; and
(ii) until December 31, [1999] 2004, on lands identified in Pub. L. No. 440, 62 Stat. 72
(1948); and
(b) 80% of taxes imposed and collected under Section 59-5-102 from new wells beginning
production on or after July 1, 1995, producing from oil and gas or other hydrocarbon substances
attributable to interests:
(i) held in trust by the United States for the Tribe and its members; and
(ii) until December 31, [1999] 2004, on lands identified in Pub. L. No. 440, 62 Stat. 72
(1948).
(2) (a) The maximum amount deposited in the Revitalization Fund may not exceed
$2,000,000 in a given fiscal year.
(b) Any amounts in excess of the maximum shall be deposited into the General Fund.


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