BILL REQ. #:  H-1352.2 

Read first time 02/12/13.   Referred to Committee on Finance.

     AN ACT Relating to fossil fuel production; amending RCW 43.180.260 and 43.30.385; adding a new section to chapter 84.36 RCW; adding a new chapter to Title 82 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Gas" means natural gas and casinghead gas, or other gaseous hydrocarbons from any lands or waters of this state, regardless of whether it is produced from a gas well or from a well producing oil or other liquid hydrocarbons.
     (2) "Oil" means crude oil, condensate, distillate, or other oil, or other liquid hydrocarbons extracted from any lands or waters of this state, regardless of gravity.
     (3) "Operating producer" means a producer who shares in the production expenses of the severed product, and who conducts, personally or by lease or contract, the daily operations of the business of producing the product including, but not limited to, the sale of the product, receipt of proceeds of the sale, and the payment of expenses.
     (4) "Person" has the meaning provided in RCW 82.04.030.
     (5) "Point of production" means:
     (a) For oil, the point where it is severed and is first metered or measured in a manner approved by the department;
     (b) For gas recovered from, or in association with, oil, where it is severed and is first metered or measured in a manner approved by the department after separation from the oil; and
     (c) For gas not recovered from, or in association with, oil, where it is severed and is first metered or measured in a manner approved by the department.
     (6) "Producer" means any person having an economic interest in the severed product, whether engaged in the business of producing or extracting oil or gas or not, who has, as a result of the ownership of such interests, a right to receive a part or all of the oil and gas produced or has a right to receive all or a part of the proceeds of the oil or gas severed. Such persons include, but are not limited to, persons owning a royalty interest, an overriding royalty interest, a working or operating interest, a net profit interest, or any combination thereof, but does not include laborers or employees working on or at the production site.
     (7) "Severance" means the taking from the lands or waters of this state of any oil and gas in any manner, except that the withdrawal of gas from underground storage, as underground storage is defined in RCW 80.40.010, may not constitute severance.
     (8) "Value" means the fair market value of the oil or gas when first metered and at the point of production.

NEW SECTION.  Sec. 2   (1) In addition to any other tax, an excise tax of twelve percent is imposed upon the severance of oil and gas from any lands or waters of this state, less the value of any part of the oil or gas, the ownership or right to which is exempt from taxation under section 4 of this act.
     (2) The measure of the tax is the value of the oil and gas at the time and point of production.

NEW SECTION.  Sec. 3   (1) The taxes imposed by this chapter on the severance of oil and gas are the liability of the producer or producers. The operating producer must file the return with the department, must pay the tax due, and must deduct and withhold the ratable share of the tax from payments made to other producers in proportion to their interest.
     (2) If oil or gas on which the severance and conservation taxes are due is not sold at the time of production but is retained by the producer, the operating producer must pay to the department the taxes due with respect to the oil and gas severed but not sold and must deduct or withhold the ratable share of the tax from payments made to other producers in proportion to their interest.
     (3) The department may require taxes to be paid upon the basis of the prevailing price being paid when first metered and point of production of other oil or gas of like kind, character, quality, or comparable source when the value reported to the department does not represent the market value of oil or gas sold or retained.

NEW SECTION.  Sec. 4   The following are exempt from the taxes imposed under this chapter:
     (1) The value of any oil or gas reinjected for storage, provided that any subsequent removal of oil or gas produced in this state from storage for sale, use, or other retention constitutes a severance within the meaning of this chapter;
     (2) The value of any oil or gas owned by a producer or producers exempt from tax by reason of federal law or a compact negotiated by the state with a tribal government; and
     (3) The value of liquid hydrocarbons that are a byproduct of carbon sequestration.

NEW SECTION.  Sec. 5   All of chapter 82.32 RCW applies to the tax imposed by this chapter. The department must provide for the effective administration of this chapter by rules which must include, but are not limited to, the value at the time and point of production and a determination of metering methods, and measuring the severance of oil and gas.

NEW SECTION.  Sec. 6   (1) The department must deposit eighty percent of the amount collected under section 2 of this act in the park land trust revolving fund under RCW 43.30.385 reduced by the amount contributed by the taxpayer under subsection (2) of this section.
     (2) A person may choose to contribute up to forty percent of the tax due under section 2 of this act that would otherwise be deposited into the park land trust revolving fund under RCW 43.30.385 to the sustainable energy trust account created in section 7 of this act.

NEW SECTION.  Sec. 7   (1) In computing tax owed under this chapter, a person may take a credit for contributions made to the sustainable energy trust account. Contributions must be deposited into the sustainable energy trust account created in this section.
     (2) A person may take a credit under this section for up to forty percent of the person's tax liability in the amount of the contribution made to the sustainable energy trust account.
     (3) A credit claimed under this section may not exceed the person's tax liability under this chapter in the tax reporting period in which the credit is claimed. Unused credits may be carried forward until used.
     (4) The sustainable energy trust account is hereby created in the state treasury. The account must be administered by the housing finance commission. Only the commission may authorize expenditures from the account.

NEW SECTION.  Sec. 8   The department must deposit twenty percent of the amount collected under section 2 of this act in the local government severance taxation account established in the state treasury. Moneys in the account may be spent only after appropriation. Expenditures from this account must be used solely for making distributions to those local governments in which impacts from oil and gas production activities occur, after appropriation by statute.

Sec. 9   RCW 43.180.260 and 2009 c 65 s 3 are each amended to read as follows:
     (1) If economically feasible, the commission ((shall)) must develop and implement a sustainable energy trust program to provide financing for qualified improvement projects. In developing the sustainable energy trust program, the commission ((shall)) must establish eligibility criteria for financing that will enable it to choose eligible applicants who are likely to repay loans made or acquired by the commission and funded from the proceeds of commission bonds.
     (2) The commission ((shall)) must, if economically feasible:
     (a) Issue bonds, as defined in RCW 43.180.020, for the purpose of financing loans for qualified energy efficiency and renewable energy improvement projects in accordance with RCW 43.180.150;
     (b) Participate fully in federal and other governmental programs and take actions that are necessary and consistent with this chapter to secure to itself and the people of the state the benefits of programs to promote energy efficiency and renewable energy technologies;
     (c) Contract with a certifying authority to accept applications for energy efficiency and renewable energy improvement projects, to review applications, including binding fixed price bids for the improvements, and to approve qualified improvements for financing by the commission. For solar electric systems, the certifying authority must use an application certification process similar to the investment cost recovery incentive application process provided under RCW 82.16.120. No work by a certifying authority may commence under this section until a request has been made by the commission; and
     (d) Before entering into a contract with a certifying authority as defined in RCW 43.180.020(2)(b), consult with the Washington State University ((energy)) extension (([extension energy])) energy program to determine which potential improvement technologies are appropriate.
     (3) The commission may accept contributions made by a person to the sustainable energy trust account created in section 7 of this act.
     (4) No general fund resources may be expended to implement this section.

NEW SECTION.  Sec. 10   A new section is added to chapter 84.36 RCW to read as follows:
     (1) The following real or personal property is exempt from property taxation: Oil or gas reserves and leases on the rights to develop and operate upon or within any lands and waters of this state for oil or gas and the property rights attached to or inherent therein.
     (2) This section does not in any way exempt the land, improvements, or other real or personal property from property taxation.

Sec. 11   RCW 43.30.385 and 2012 c 166 s 8 are each amended to read as follows:
     (1) The park land trust revolving fund is to be utilized by the department for the purpose of acquiring real property, including all reasonable costs associated with these acquisitions, as a replacement for the property transferred to the state parks and recreation commission, as directed by the legislature in order to maintain the land base of the affected trusts or under RCW 79.22.060 and to receive voluntary contributions for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department.
     (2) In addition to the other purposes identified in this section, the park land trust revolving fund may be utilized by the department to hold funding for future acquisition of lands for the community forest trust program from willing sellers under RCW 79.155.040.
     (3)(a) Proceeds from transfers of real property to the state parks and recreation commission or other proceeds identified from transfers of real property as directed by the legislature ((shall)) must be deposited in the park land trust revolving fund.
     (b) Except as otherwise provided in this subsection, the proceeds from real property transferred or disposed under RCW 79.22.060 must be used solely to purchase replacement forest land, that must be actively managed as a working forest, within the same county as the property transferred or disposed. If the real property was transferred under RCW 79.22.060 (1)(c) and (2)(c) from within a county participating in the state forest land pool created under RCW 79.22.140, replacement forest land may be located within any county participating in the land pool.
     (c) Disbursement from the park land trust revolving fund to acquire replacement property and for operating and maintaining public use and recreation facilities ((shall)) must be on the authorization of the department.
     (d) The proceeds from the recreation access pass account created in RCW 79A.80.090 must be solely used for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department.
     (4) In order to maintain an effective expenditure and revenue control, the park land trust revolving fund is subject in all respects to chapter 43.88 RCW, but no appropriation is required to permit expenditures and payment of obligations from the fund.
     (5) The department is authorized to solicit and receive voluntary contributions for the purpose of operating and maintaining public use and recreation facilities, including trails, managed by the department. The department may seek voluntary contributions from individuals and organizations for this purpose. Voluntary contributions ((will)) must be deposited into the park land trust revolving fund and used solely for the purpose of public use and recreation facilities operations and maintenance. Voluntary contributions are not considered a fee for use of these facilities.
     (6) A portion of the moneys from this fund collected from the oil and gas severance tax may be used to recover the cost of oil and gas regulation as contained in the budget of the department of natural resources.

NEW SECTION.  Sec. 12   Sections 1 through 8 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 13   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 14   This act takes effect January 1, 2014.