Full Text of HB4312 97th General Assembly
HB4312ham001 97TH GENERAL ASSEMBLY | Rep. Naomi D. Jakobsson Filed: 3/21/2012
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| 1 | | AMENDMENT TO HOUSE BILL 4312
| 2 | | AMENDMENT NO. ______. Amend House Bill 4312 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Oil and Gas Act is amended by | 5 | | changing Section 1 and by adding Section 29 as follows:
| 6 | | (225 ILCS 725/1) (from Ch. 96 1/2, par. 5401)
| 7 | | Sec. 1.
Unless the context otherwise requires, the words | 8 | | defined in this
Section have the following meanings as used in | 9 | | this Act.
| 10 | | "Person" means any natural person, corporation, | 11 | | association,
partnership, governmental agency or other legal | 12 | | entity, receiver, trustee,
guardian, executor, administrator, | 13 | | fiduciary or representative of any kind.
| 14 | | "Oil" means natural crude oil or petroleum and other | 15 | | hydrocarbons,
regardless of gravity, which are produced at the | 16 | | well in liquid form by
ordinary production methods or by the |
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| 1 | | use of an oil and gas separator and
which are not the result of | 2 | | condensation of gas after it leaves the
underground reservoir.
| 3 | | "Gas" means all natural gas, including casinghead gas, and | 4 | | all other
natural hydrocarbons not defined above as oil.
| 5 | | "Pool" means a natural, underground reservoir containing | 6 | | in whole or in
part, a natural accumulation of oil or gas, or | 7 | | both. Each productive zone
or stratum of a general structure, | 8 | | which is completely separated from any
other zone or stratum in | 9 | | the structure, is deemed a separate "pool" as used
herein.
| 10 | | "Field" means the same general surface area which is | 11 | | underlaid or
appears to be underlaid by one or more pools.
| 12 | | "Permit" means the Department's written authorization | 13 | | allowing a well
to be drilled, deepened, converted, or operated | 14 | | by an owner.
| 15 | | "Permittee" means the owner holding or required to hold the
| 16 | | permit, and
who is also responsible for paying assessments in | 17 | | accordance with Section
19.7 of this Act and, where applicable, | 18 | | executing and filing the bond
associated with the well as | 19 | | principal and who is responsible for compliance
with all | 20 | | statutory and regulatory requirements pertaining to the well.
| 21 | | When the right and responsibility for operating a well is | 22 | | vested in a
receiver or trustee appointed by a court of | 23 | | competent jurisdiction, the
permit shall be issued to the | 24 | | receiver or trustee.
| 25 | | "Orphan Well" means a well for which: (1) no fee assessment | 26 | | under
Section 19.7 of this Act has been paid or no other bond |
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| 1 | | coverage has been
provided for 2 consecutive years; (2) no oil | 2 | | or gas has been produced from
the well or from the lease or | 3 | | unit on which the well is located for 2
consecutive years; and | 4 | | (3) no permittee or owner can be identified or
located by the | 5 | | Department. Orphaned wells include wells that may have been
| 6 | | drilled for purposes other than those for which a permit is | 7 | | required under
this Act if the well is a conduit for oil or | 8 | | salt water intrusions into
fresh water zones or onto the | 9 | | surface which may be caused by oil and gas
operations.
| 10 | | "Owner" means the person who has the right to drill into | 11 | | and produce
from any pool, and to appropriate the production | 12 | | either for the person or for
the person and another, or others, | 13 | | or solely for others, excluding the
mineral owner's royalty if
| 14 | | the right to drill and produce has been granted under an oil | 15 | | and gas lease.
An owner may also be a person granted the right | 16 | | to drill and operate an
injection (Class II UIC) well | 17 | | independent of the right to drill for and produce
oil or gas. | 18 | | When the right to drill, produce, and appropriate production is
| 19 | | held by more than one person, then all persons holding these | 20 | | rights may
designate the owner by a written operating agreement | 21 | | or similar written
agreement. In the absence of such an | 22 | | agreement, and subject to the provisions
of Sections 22.2 and | 23 | | 23.1 through 23.16 of this Act, the owner shall be the
person | 24 | | designated in writing by a majority in interest of the persons | 25 | | holding
these rights.
| 26 | | "Department" means the Department of Natural Resources.
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| 1 | | "Director" means the Director of Natural Resources.
| 2 | | "Mining Board" means the State Mining Board in the | 3 | | Department of Natural
Resources, Office of Mines
and Minerals.
| 4 | | "Mineral Owner's Royalty" means the share of oil and gas | 5 | | production
reserved in an oil and gas lease free of all costs | 6 | | by an owner of the
minerals whether denominated royalty or | 7 | | overriding royalty.
| 8 | | "Waste" means "physical waste" as that term is generally | 9 | | understood in
the oil and gas industry, and further includes:
| 10 | | (1) the locating, drilling and producing of any oil or | 11 | | gas well or wells
drilled contrary to the valid order, | 12 | | rules and regulations adopted by the
Department under the | 13 | | provisions of this Act.
| 14 | | (2) permitting the migration of oil, gas, or water from | 15 | | the stratum in
which it is found, into other strata, | 16 | | thereby ultimately resulting in the
loss of recoverable | 17 | | oil, gas or both;
| 18 | | (3) the drowning with water of any stratum or part | 19 | | thereof capable of
producing oil or gas, except for | 20 | | secondary recovery purposes;
| 21 | | (4) the unreasonable damage to underground, fresh or | 22 | | mineral water
supply, workable coal seams, or other mineral | 23 | | deposits in the operations
for the discovery, development, | 24 | | production, or handling of oil and gas;
| 25 | | (5) the unnecessary or excessive surface loss or | 26 | | destruction of oil or
gas resulting from evaporation, |
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| 1 | | seepage, leakage or fire, especially such
loss or | 2 | | destruction incident to or resulting from the escape of gas | 3 | | into
the open air in excessive or unreasonable amounts, | 4 | | provided, however,
it shall not be unlawful for the | 5 | | operator
or owner of any well producing both oil and gas to | 6 | | burn such gas in flares
when such gas is, under the other | 7 | | provisions of this Act, lawfully
produced, and where there | 8 | | is no market at the well for such escaping gas;
and where | 9 | | the same is used for the extraction of casinghead gas, it | 10 | | shall
not be unlawful for the operator of the plant after | 11 | | the process of
extraction is completed, to burn such | 12 | | residue in flares when there is no
market at such plant for | 13 | | such residue gas;
| 14 | | (6) permitting unnecessary fire hazards;
| 15 | | (7) permitting unnecessary damage to or destruction of | 16 | | the surface,
soil, animal, fish or aquatic life or property | 17 | | from oil or gas operations.
| 18 | | "Drilling Unit" means the surface area allocated by an | 19 | | order or
regulation of the Department to the drilling of a | 20 | | single well for the
production of oil or gas from an individual | 21 | | pool.
| 22 | | "Enhanced Recovery Method" means any method used in an | 23 | | effort to
recover hydrocarbons from a pool by injection of | 24 | | fluids, gases or other
substances to maintain, restore or | 25 | | augment natural reservoir energy, or by
introducing immiscible | 26 | | or miscible gases, chemicals, other substances or
heat or by |
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| 1 | | in-situ combustion, or by any combination thereof.
| 2 | | "Well-Site Equipment" means any production-related | 3 | | equipment or materials
specific to the well, including motors, | 4 | | pumps, pump jacks, tanks, tank
batteries, separators, | 5 | | compressors, casing, tubing, and rods.
| 6 | | "First purchaser" means any person who completes an initial | 7 | | purchase of oil or gas from a well in Illinois. | 8 | | "Interest owner" means a person who owns or possesses an | 9 | | interest in the gross production of oil or gas produced from a | 10 | | well in Illinois. | 11 | | (Source: P.A. 89-243, eff. 8-4-95; 89-445, eff. 2-7-96.)
| 12 | | (225 ILCS 725/29 new) | 13 | | Sec. 29. Oil and gas production tax. | 14 | | (a) On and after January 1, 2013, in addition to any other | 15 | | tax, fee, or levy imposed by the State or any unit of local | 16 | | government in this State, a tax is levied upon the privilege of | 17 | | producing oil and gas from the earth or water in this State for | 18 | | sale, transport, storage, profit, or commercial use. | 19 | | (b) The tax levied under this Section on gas shall be equal | 20 | | to the greater of (i) 12% of the gross value of the gas at the | 21 | | point of production or (ii) $0.36 per 1,000 cubic feet of gas | 22 | | produced. The tax levied under this Section on oil shall be | 23 | | equal to the greater of (i) 12% of the gross value of the oil at | 24 | | the point of production or (ii) $2.88 per barrel of oil | 25 | | produced. |
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| 1 | | (c) The amount of the tax payable each month under this | 2 | | Section shall be due and payable on or before the 15th day of | 3 | | the month immediately following the end of the month of | 4 | | production. | 5 | | The tax under this Section is imposed on interest owners in | 6 | | the proportion of their respective beneficial interests in the | 7 | | oil or gas at the time of severance. If the oil or gas is sold | 8 | | in the same month that it is produced, the first purchaser of | 9 | | the oil or gas shall collect the amount of the tax due from the | 10 | | interest owners by deducting and withholding such amount from | 11 | | any payments made for that oil or gas by the first purchaser to | 12 | | the interest owner, and shall pay the tax imposed by this | 13 | | Section. Money withheld by the first purchaser under this | 14 | | subsection is held in trust for the use and benefit of the | 15 | | State and may not be commingled with other funds of the first | 16 | | purchaser. If the oil or gas is not sold in the same month that | 17 | | it is produced, the interest owners shall pay the tax imposed | 18 | | by this Section as if the oil or gas were sold that month. | 19 | | In no event shall an interest owner be relieved of | 20 | | responsibility for the tax until it has been paid. If the tax | 21 | | is withheld by a first purchaser and that first purchaser fails | 22 | | to make payment of the tax to the State as required herein, | 23 | | then the interest owners shall be entitled to bring an action | 24 | | against such purchaser to recover the amount of tax so withheld | 25 | | together with penalties and interest that may have accrued by | 26 | | failure to make such payment. |
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| 1 | | (d) The moneys collected from the taxes levied under this | 2 | | Section shall be remitted to the Department of Revenue along | 3 | | with a return provided by the Department of Revenue containing | 4 | | any information the Department of Revenue may require. The | 5 | | return shall be filed no later than the 15th day of the month | 6 | | following the end of the month of production. The moneys | 7 | | received by the Department of Revenue pursuant to this Section | 8 | | shall be deposited into the General Revenue Fund. | 9 | | (e) The Department of Revenue shall have a lien for the tax | 10 | | herein imposed or any portion thereof, or for any penalty | 11 | | provided for in this Section, upon all oil and gas produced in | 12 | | this State, whether in possession of an interest owner, | 13 | | producer, operator, storage operator, first purchaser, or | 14 | | subsequent purchaser, to secure the payment of the tax required | 15 | | under this Section. | 16 | | (f) Any tax which is not paid when due shall bear interest | 17 | | at the rate and in the manner specified in Sections 3-2 and 3-9 | 18 | | of the Uniform Penalty and Interest Act from the date when the | 19 | | tax becomes past due until the tax is paid or a judgment is | 20 | | obtained by the Department of Revenue. If the amount of the tax | 21 | | computed by the Department of Revenue is greater than the | 22 | | amount of the tax due under the return or returns as filed, or | 23 | | if the tax or any part of the tax that is admitted to be due by | 24 | | a return or returns, whether filed on time or not, is not paid, | 25 | | then the Department of Revenue shall issue to the interest | 26 | | owner a notice of tax liability for the amount of tax claimed |
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| 1 | | by the Department to be due together with a penalty in an | 2 | | amount determined in accordance with Section 3-3 of the Uniform | 3 | | Penalty and Interest Act. If the incorrectness of any return or | 4 | | returns as determined by the Department is due to negligence or | 5 | | fraud, that penalty shall be in an amount determined in | 6 | | accordance with Section 3-5 or Section 3-6 of the Uniform | 7 | | Penalty and Interest Act, as the case may be. If the notice of | 8 | | tax liability is not based on a correction of the taxpayer's | 9 | | return or returns, but is based on the taxpayer's failure to | 10 | | pay all or a part of the tax admitted by his or her return or | 11 | | returns (whether filed on time or not) to be due, such notice | 12 | | of tax liability shall be prima facie correct and shall be | 13 | | prima facie evidence of the correctness of the amount of tax | 14 | | due, as shown therein. | 15 | | (g) If any payment received by the Department under this | 16 | | Section exceeds the taxpayer's liabilities under this Section, | 17 | | the Department of Revenue shall, if requested by the taxpayer, | 18 | | issue to the taxpayer a credit memorandum no later than 30 days | 19 | | after the date of the request. If no such request is made, the | 20 | | taxpayer may credit such excess payment against the payment of | 21 | | any subsequent assessment under this Section, in accordance | 22 | | with reasonable rules and regulations prescribed by the | 23 | | Department of Revenue. | 24 | | (h) Within 60 days after the issuance of a notice of tax | 25 | | liability, the taxpayer may file with the Department of Revenue | 26 | | a written protest against the proposed assessment in such form |
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| 1 | | as the Department of Revenue may by regulation prescribe, | 2 | | setting forth the grounds on which such protest is based. If a | 3 | | taxpayer timely files a protest, then the Department of Revenue | 4 | | shall reconsider the proposed assessment and, if the taxpayer | 5 | | has so requested, shall grant the taxpayer or his authorized | 6 | | representative a hearing. Following that hearing, the | 7 | | Department of Revenue shall issue a final assessment to the | 8 | | taxpayer for the amount found to be due as a result of the | 9 | | hearing. | 10 | | If a protest to the notice of tax liability and a request | 11 | | for a hearing thereon is not filed within 60 days after receipt | 12 | | of the notice, that notice of tax liability shall become final | 13 | | without the necessity of a final assessment being issued and | 14 | | shall be deemed to be a final assessment. | 15 | | (i) The Circuit Court of the county in which the well is | 16 | | located shall have power to review all final administrative | 17 | | decisions of the Department of Revenue in administering the | 18 | | provisions of this Section. The provisions of the | 19 | | Administrative Review Law, and the rules adopted pursuant | 20 | | thereto, shall apply to and govern all proceedings for the | 21 | | judicial review of final administrative decisions of the | 22 | | Department hereunder. The term "administrative decision" is | 23 | | defined as in Section 3-101 of the Code of Civil Procedure. | 24 | | After the expiration of the period within which the person | 25 | | assessed may file an action for judicial review under the | 26 | | Administrative Review Law without such an action being filed, a |
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| 1 | | certified copy of the final assessment or revised final | 2 | | assessment of the Department may be filed with the Circuit | 3 | | Court of the county in which the well is located. The certified | 4 | | copy of the final assessment or revised final assessment shall | 5 | | be accompanied by a certification which recites facts that are | 6 | | sufficient to show that the Department of Revenue complied with | 7 | | the jurisdictional requirements of this Section in arriving at | 8 | | its final assessment or its revised final assessment and that | 9 | | the taxpayer had an opportunity for an administrative hearing | 10 | | and for judicial review. If the court is satisfied that the | 11 | | Department of Revenue complied with the jurisdictional | 12 | | requirements of this Section in arriving at its final | 13 | | assessment or its revised final assessment and that the | 14 | | taxpayer had an opportunity for an administrative hearing and | 15 | | for judicial review, the court shall render judgment in favor | 16 | | of the Department of Revenue and against the taxpayer for the | 17 | | amount shown to be due by the final assessment or the revised | 18 | | final assessment, plus any interest that may be due, and such | 19 | | judgment shall be entered in the judgment docket of the court. | 20 | | Such judgment shall bear the same rate of interest and shall | 21 | | have the same effect as other judgments. The judgment may be | 22 | | enforced, and all laws applicable to sales for the enforcement | 23 | | of a judgment shall be applicable to sales made under such | 24 | | judgments. The Department of Revenue shall file the certified | 25 | | copy of its assessment with the Circuit Court within 2 years | 26 | | after such assessment becomes final, except when the taxpayer |
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| 1 | | consents in writing to an extension of the filing period, and | 2 | | except that the time limitation period on the Department of | 3 | | Revenue's right to file the certified copy of its assessment | 4 | | with the Circuit Court shall not run during any period of time | 5 | | in which the order of any court has the effect of enjoining or | 6 | | restraining the Department of Revenue from filing such | 7 | | certified copy of its assessment with the Circuit Court. | 8 | | (j) Every interest owner, producer, operator, storage | 9 | | operator, and first purchaser shall keep such records, | 10 | | receipts, invoices and other pertinent books, documents, | 11 | | memoranda and papers as the Department of Revenue shall | 12 | | require, in such form as the Department of Revenue shall | 13 | | require in order to administer and enforce this Section. The | 14 | | Department of Revenue may adopt rules that establish | 15 | | requirements, including record forms and formats, for records | 16 | | required to be kept and maintained by taxpayers. For purposes | 17 | | of this Section, "records" means all data maintained by the | 18 | | taxpayer, including data on paper, microfilm, microfiche, or on | 19 | | any type of machine-sensible data compilation. For the purpose | 20 | | of administering and enforcing the provisions hereof, the | 21 | | Department of Revenue, or any officer or employee of the | 22 | | Department of Revenue designated, in writing, by the Director | 23 | | thereof, may hold investigations and hearings concerning any | 24 | | matters covered herein and may examine any relevant books, | 25 | | papers, records, documents, or memoranda of any serviceman or | 26 | | any taxable purchaser for use hereunder, and may require the |
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| 1 | | attendance of such person or any officer or employee of such | 2 | | person, or of any person having knowledge of the facts, and may | 3 | | take testimony and require proof for its information. | 4 | | (k) The Department of Revenue is authorized to make, | 5 | | promulgate, and enforce reasonable rules relating to the | 6 | | administration and enforcement of this Section.
| 7 | | Section 99. Effective date. This Act takes effect upon | 8 | | becoming law.".
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