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H.B. 29 Enrolled
This act amends provisions relating to Mines and Mining and the Oil and Gas Severance
Tax. This act modifies the due dates for making quarterly payments of fees deposited
into the Oil and Gas Conservation Account and requires the fees to be reported on forms
provided by the State Tax Commission. The act modifies the requirements for making
quarterly payments of the oil and gas severance tax. The act modifies provisions relating
to claiming a tax credit for a workover or recompletion. The act repeals obsolete
language and makes technical changes. This act provides for retrospective operation.
This act provides a coordination clause.
This act affects sections of Utah Code Annotated 1953 as follows:
40-6-14, as last amended by Chapter 8, Laws of Utah 2000
59-5-102, as last amended by Chapter 414, Laws of Utah 1998
59-5-107, as last amended by Chapter 228, Laws of Utah 1995
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 40-6-14 is amended to read:
40-6-14. Fee on oil and gas at well -- Payment of fee -- Collection -- Penalty and
interest on delinquencies -- Payment when product taken in-kind -- Interests exempt.
(1) There is levied a fee of .002 of the value at the well of oil and gas:
(a) produced and saved;
(b) sold; or
(c) transported from the premises in Utah where the oil or gas is produced.
(2) (a) The State Tax Commission shall administer the collection of the fee, including
any penalties and interest.
(b) The monies collected shall be deposited in the Oil and Gas Conservation Account
created in Section 40-6-14.5 .
(c) Time periods for the State Tax Commission to allow a refund or assess the fee shall
be determined in accordance with Section 59-5-114 .
(3) (a) Each person having an ownership interest in oil or gas at the time of production
shall be liable for a proportionate share of the fee equivalent to his ownership interest.
(b) As used in this section "ownership interest" means any:
(i) working interest;
(ii) royalty interest;
(iii) interest in payments out of production; or
(iv) any other interest in the oil or gas, or in the proceeds of the oil or gas, subject to the
(4) (a) The operator, on behalf of [
ownership interest in the oil or gas, shall pay the [
(i) quarterly; and
(ii) as provided in Subsections (4)(b) and (c).
(b) For purposes of Subsection (4)(a), the quarterly fee payments are due as follows:
(i) for the quarter beginning on January 1 and ending on March 31, on or before June 1;
(ii) for the quarter beginning on April 1 and ending on June 30, on or before September
(iii) for the quarter beginning on July 1 and ending on September 30, on or before
December 1; and
(iv) for the quarter beginning on October 1 and ending on December 31, on or before
March 1 of the next year.
(c) The fee required by this section shall be reported to the State Tax Commission on
forms provided by the State Tax Commission.
(5) (a) Any fee not paid within the time specified shall:
(i) carry a penalty as provided in Section 59-1-401 ; and
(ii) bear interest at the rate and in the manner prescribed in Section 59-1-402 .
(b) (i) The fee, together with the interest, shall be a lien upon the oil or gas against which
(ii) The operator shall deduct from any amounts due to the persons owning an interest in
the oil or gas, or in the proceeds at the time of production, a proportionate amount of the charge
before making payment to the persons.
(6) (a) When product is taken in-kind by an interest owner who is not the operator and
the operator cannot determine the value of the in-kind product, the operator shall:
(i) report 100% of the production;
(ii) deduct the product taken in-kind; and
(iii) pay the levy on the difference.
(b) The interest owner who takes the product in-kind shall file a report and pay the levy
(7) This section shall apply to any interest in oil or gas produced in the state except:
(a) any interest of the United States;
(b) any interest of the state or [
any oil or gas or in the proceeds of the oil or gas;
(c) any interest of any Indian or Indian tribe in any oil or gas or in the proceeds produced
from land subject to the supervision of the United States; or
(d) oil or gas used in producing or drilling operations or for repressuring or recycling
Section 2. Section 59-5-102 is amended to read:
59-5-102. Severance tax -- Rate -- Computation -- Annual exemption.
(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 [
value, at the well, of the oil or gas produced, saved, and sold or transported from the field where
the substance was produced as provided in this section.
(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 [
(i) the shipment constitutes a sale[
(ii) the oil or gas is subject to the [
tax is not [
(C) delivered. [
(ii) Notwithstanding Subsection (1)(f)(i), if oil or gas [
two years, the oil or gas is subject to the [
(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) [
working interest owner who pays for all or part of the expenses of a recompletion or workover [
(b) The tax credit under Subsection (3)(a) for each recompletion or workover may not
exceed $30,000 per well during each calendar year. [
(c) If any amount of tax credit a taxpayer is allowed under this Subsection (3) exceeds
the taxpayer's tax liability under this part for the calendar year for which the taxpayer claims the
tax credit, the amount of tax credit exceeding the taxpayer's tax liability for the calendar year may
be carried forward for the next three calendar years.
(4) A 50% reduction in the tax rate is imposed upon the incremental production achieved
from an enhanced recovery project.
(a) in addition to all other taxes provided by law; and [
(b) delinquent, unless otherwise deferred, on June 1 next succeeding the calendar year
when the oil or gas is:
(i) (A) produced[
(C) sold; or
(ii) transported from the premises.
(6) With respect to the tax imposed by this [
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
(7) The tax imposed by this section shall be reported and paid by each producer [
that 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 imposed by this section from the amounts due to
other owners for the production or the proceeds of the production.
Section 3. Section 59-5-107 is amended to read:
59-5-107. Date tax due -- Extensions -- Installment payments -- Penalty on
delinquencies -- Audit.
part is due and payable on or before June 1 of the year next succeeding the calendar year when
the oil or gas is:
(a) (i) produced[
(iii) sold; or
(b) transported from the field where produced.
shown upon a written application by the taxpayer, extend the time of payment of the whole or
any part of the tax for a period not to exceed six months.
(b) If the commission allows an extension [
the rate and in the manner prescribed in Section 59-1-402 shall be charged and added to the
amount of the [
(b) For purposes of Subsection (3)(a), each quarterly installment shall be based on the
estimated gross value received by the taxpayer during the quarter preceding the date on which the
installment is due.
(a) for the quarter beginning on January 1 [
before June 1;
(b) for the quarter beginning on April 1 [
(c) for the quarter beginning on July 1 [
before December 1; and
(d) for the quarter beginning on October 1 [
before March 1 of the next year.
(5) (a) [
tax imposed by Section 59-5-102 is not paid when due or is underpaid, the taxpayer is subject to
the penalty provided under Section 59-1-401 [
the tax due for a quarter is paid.
or for underpayment of a tax may not be assessed if the taxpayer's total quarterly tax installment
the preceding [
(8) The commission may conduct audits to determine whether any tax is owed under this
Section 4. Retrospective operation.
(1) Subject to Subsection (2), this act has retrospective operation to January 1, 2003.
(2) This act applies to returns filed for calendar years beginning on or after January 1,
Section 5. Coordination clause.
If this bill and H.B. 28, Oil and Gas Severance Tax Amendments, both pass, it is the
intent of the Legislature that the amendments to Subsections 59-5-102 (3)(a) and (9) in H.B. 28
supersede the amendments to Subsections 59-5-102 (3)(a) and (9) in this bill.
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