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Date of Hearing: January 11, 2010
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
AB 656 (Torrico) - As Amended: January 4, 2010
2/3 vote. Urgency. Fiscal committee.
SUBJECT : California Higher Education Endowment Corporation:
oil and gas severance tax
SUMMARY : Enacts the Oil and Gas Severance Tax Law to fund
direct classroom instruction at the California Community
Colleges, the California State University, and the University of
California. Specifically, the tax-related provisions of
this
bill :
1)Impose, on and after January 1, 2010, an "oil" and "gas"
severance tax on any "producer" for the privilege of severing
oil or gas from the earth or water in California for sale,
transport, consumption, storage, profit, or use. The tax
shall be applied equally to all portions of the product's
"gross value" and imposed at the rate of 12.5% of the gross
product.
2)Define "oil" as petroleum, or other crude oil, condensate,
casing head gasoline, or other mineral oil that is mined,
produced, or withdrawn from below the surface of the soil or
water in this state.
3)Define "gas" as all natural gas, including casing head gas,
and all other hydrocarbons not defined as oil.
4)Define a "producer" as a person who does any of the following:
a) Takes oil or gas from the earth or water in California
in any manner;
b) Owns, controls, manages, or leases any oil or gas well
in the earth or water in California;
c) Produces or extracts in any manner any oil or gas by
taking it from the earth or water in California;
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d) Acquires the severed oil or gas from a person or agency
exempt from property taxation under federal or state law;
or,
e) Owns a royalty or other interest in oil or gas or its
value, whether the oil or gas is produced by the owner or
by another on the owner's behalf.
5)Provide that two or more producers that are corporations and
are owned or controlled directly or indirectly by the same
interests, as specified, are considered a single producer for
the purposes of this tax.
6)Define "gross value" as the sale price at the mouth of the
well, including any bonus, premium, or other thing of value
paid for the oil or gas, as determined by a rolling 30-day
average daily value. If oil or gas is exchanged for something
other than cash, if there is no sale at the time of severance,
or if the relationship between the buyer and seller is such
that the consideration paid, if any, is not indicative of the
true value or market price, then the value of the oil or gas
shall be determined by the State Board of Equalization (BOE)
based on the cash price paid to the producer for like quality
oil or gas in the vicinity of the well.
7)Exempt from the severance tax oil or gas owned or produced by
any political subdivision of the state, including that
political subdivision's proprietary share of oil or gas
produced under any unit, cooperative, or other pooling
agreement. A "political subdivision of the state" is defined
to include "any local entity, as defined in Section 900.4 of
the Government Code."
8)Exempt from the severance tax oil or gas produced by a
stripper well in which the average value of oil or gas is less
than 3/4ths of the average gross value of the product as of
January 1 of the prior year. A stripper well, in turn, is
defined as a well that has been certified by BOE as an oil
well incapable of producing an average of more than 10 barrels
of oil per day during the entire taxable month.
9)Impose the oil and gas severance tax in addition to any ad
valorem property tax or business license tax that may
otherwise be imposed.
AB 656
