Rep. Naomi D. Jakobsson

Filed: 3/21/2012

 

 


 

 


 
09700HB4312ham001LRB097 15303 HLH 67736 a

1
AMENDMENT TO HOUSE BILL 4312

2    AMENDMENT NO. ______. Amend House Bill 4312 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Oil and Gas Act is amended by
5changing 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
8defined in this Section have the following meanings as used in
9this Act.
10    "Person" means any natural person, corporation,
11association, partnership, governmental agency or other legal
12entity, receiver, trustee, guardian, executor, administrator,
13fiduciary or representative of any kind.
14    "Oil" means natural crude oil or petroleum and other
15hydrocarbons, regardless of gravity, which are produced at the
16well in liquid form by ordinary production methods or by the

 

 

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1use of an oil and gas separator and which are not the result of
2condensation of gas after it leaves the underground reservoir.
3    "Gas" means all natural gas, including casinghead gas, and
4all other natural hydrocarbons not defined above as oil.
5    "Pool" means a natural, underground reservoir containing
6in whole or in part, a natural accumulation of oil or gas, or
7both. Each productive zone or stratum of a general structure,
8which is completely separated from any other zone or stratum in
9the structure, is deemed a separate "pool" as used herein.
10    "Field" means the same general surface area which is
11underlaid or appears to be underlaid by one or more pools.
12    "Permit" means the Department's written authorization
13allowing a well to be drilled, deepened, converted, or operated
14by an owner.
15    "Permittee" means the owner holding or required to hold the
16permit, and who is also responsible for paying assessments in
17accordance with Section 19.7 of this Act and, where applicable,
18executing and filing the bond associated with the well as
19principal and who is responsible for compliance with all
20statutory and regulatory requirements pertaining to the well.
21    When the right and responsibility for operating a well is
22vested in a receiver or trustee appointed by a court of
23competent jurisdiction, the permit shall be issued to the
24receiver or trustee.
25    "Orphan Well" means a well for which: (1) no fee assessment
26under Section 19.7 of this Act has been paid or no other bond

 

 

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1coverage has been provided for 2 consecutive years; (2) no oil
2or gas has been produced from the well or from the lease or
3unit on which the well is located for 2 consecutive years; and
4(3) no permittee or owner can be identified or located by the
5Department. Orphaned wells include wells that may have been
6drilled for purposes other than those for which a permit is
7required under this Act if the well is a conduit for oil or
8salt water intrusions into fresh water zones or onto the
9surface which may be caused by oil and gas operations.
10    "Owner" means the person who has the right to drill into
11and produce from any pool, and to appropriate the production
12either for the person or for the person and another, or others,
13or solely for others, excluding the mineral owner's royalty if
14the right to drill and produce has been granted under an oil
15and gas lease. An owner may also be a person granted the right
16to drill and operate an injection (Class II UIC) well
17independent of the right to drill for and produce oil or gas.
18When the right to drill, produce, and appropriate production is
19held by more than one person, then all persons holding these
20rights may designate the owner by a written operating agreement
21or similar written agreement. In the absence of such an
22agreement, and subject to the provisions of Sections 22.2 and
2323.1 through 23.16 of this Act, the owner shall be the person
24designated in writing by a majority in interest of the persons
25holding 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
3Department of Natural Resources, Office of Mines and Minerals.
4    "Mineral Owner's Royalty" means the share of oil and gas
5production reserved in an oil and gas lease free of all costs
6by an owner of the minerals whether denominated royalty or
7overriding royalty.
8    "Waste" means "physical waste" as that term is generally
9understood 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
19order or regulation of the Department to the drilling of a
20single well for the production of oil or gas from an individual
21pool.
22    "Enhanced Recovery Method" means any method used in an
23effort to recover hydrocarbons from a pool by injection of
24fluids, gases or other substances to maintain, restore or
25augment natural reservoir energy, or by introducing immiscible
26or miscible gases, chemicals, other substances or heat or by

 

 

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1in-situ combustion, or by any combination thereof.
2    "Well-Site Equipment" means any production-related
3equipment or materials specific to the well, including motors,
4pumps, pump jacks, tanks, tank batteries, separators,
5compressors, casing, tubing, and rods.
6    "First purchaser" means any person who completes an initial
7purchase of oil or gas from a well in Illinois.
8    "Interest owner" means a person who owns or possesses an
9interest in the gross production of oil or gas produced from a
10well 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
15tax, fee, or levy imposed by the State or any unit of local
16government in this State, a tax is levied upon the privilege of
17producing oil and gas from the earth or water in this State for
18sale, transport, storage, profit, or commercial use.
19    (b) The tax levied under this Section on gas shall be equal
20to the greater of (i) 12% of the gross value of the gas at the
21point of production or (ii) $0.36 per 1,000 cubic feet of gas
22produced. The tax levied under this Section on oil shall be
23equal to the greater of (i) 12% of the gross value of the oil at
24the point of production or (ii) $2.88 per barrel of oil
25produced.

 

 

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1    (c) The amount of the tax payable each month under this
2Section shall be due and payable on or before the 15th day of
3the month immediately following the end of the month of
4production.
5    The tax under this Section is imposed on interest owners in
6the proportion of their respective beneficial interests in the
7oil or gas at the time of severance. If the oil or gas is sold
8in the same month that it is produced, the first purchaser of
9the oil or gas shall collect the amount of the tax due from the
10interest owners by deducting and withholding such amount from
11any payments made for that oil or gas by the first purchaser to
12the interest owner, and shall pay the tax imposed by this
13Section. Money withheld by the first purchaser under this
14subsection is held in trust for the use and benefit of the
15State and may not be commingled with other funds of the first
16purchaser. If the oil or gas is not sold in the same month that
17it is produced, the interest owners shall pay the tax imposed
18by this Section as if the oil or gas were sold that month.
19    In no event shall an interest owner be relieved of
20responsibility for the tax until it has been paid. If the tax
21is withheld by a first purchaser and that first purchaser fails
22to make payment of the tax to the State as required herein,
23then the interest owners shall be entitled to bring an action
24against such purchaser to recover the amount of tax so withheld
25together with penalties and interest that may have accrued by
26failure to make such payment.

 

 

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1    (d) The moneys collected from the taxes levied under this
2Section shall be remitted to the Department of Revenue along
3with a return provided by the Department of Revenue containing
4any information the Department of Revenue may require. The
5return shall be filed no later than the 15th day of the month
6following the end of the month of production. The moneys
7received by the Department of Revenue pursuant to this Section
8shall be deposited into the General Revenue Fund.
9    (e) The Department of Revenue shall have a lien for the tax
10herein imposed or any portion thereof, or for any penalty
11provided for in this Section, upon all oil and gas produced in
12this State, whether in possession of an interest owner,
13producer, operator, storage operator, first purchaser, or
14subsequent purchaser, to secure the payment of the tax required
15under this Section.
16    (f) Any tax which is not paid when due shall bear interest
17at the rate and in the manner specified in Sections 3-2 and 3-9
18of the Uniform Penalty and Interest Act from the date when the
19tax becomes past due until the tax is paid or a judgment is
20obtained by the Department of Revenue. If the amount of the tax
21computed by the Department of Revenue is greater than the
22amount of the tax due under the return or returns as filed, or
23if the tax or any part of the tax that is admitted to be due by
24a return or returns, whether filed on time or not, is not paid,
25then the Department of Revenue shall issue to the interest
26owner a notice of tax liability for the amount of tax claimed

 

 

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1by the Department to be due together with a penalty in an
2amount determined in accordance with Section 3-3 of the Uniform
3Penalty and Interest Act. If the incorrectness of any return or
4returns as determined by the Department is due to negligence or
5fraud, that penalty shall be in an amount determined in
6accordance with Section 3-5 or Section 3-6 of the Uniform
7Penalty and Interest Act, as the case may be. If the notice of
8tax liability is not based on a correction of the taxpayer's
9return or returns, but is based on the taxpayer's failure to
10pay all or a part of the tax admitted by his or her return or
11returns (whether filed on time or not) to be due, such notice
12of tax liability shall be prima facie correct and shall be
13prima facie evidence of the correctness of the amount of tax
14due, as shown therein.
15    (g) If any payment received by the Department under this
16Section exceeds the taxpayer's liabilities under this Section,
17the Department of Revenue shall, if requested by the taxpayer,
18issue to the taxpayer a credit memorandum no later than 30 days
19after the date of the request. If no such request is made, the
20taxpayer may credit such excess payment against the payment of
21any subsequent assessment under this Section, in accordance
22with reasonable rules and regulations prescribed by the
23Department of Revenue.
24    (h) Within 60 days after the issuance of a notice of tax
25liability, the taxpayer may file with the Department of Revenue
26a written protest against the proposed assessment in such form

 

 

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1as the Department of Revenue may by regulation prescribe,
2setting forth the grounds on which such protest is based. If a
3taxpayer timely files a protest, then the Department of Revenue
4shall reconsider the proposed assessment and, if the taxpayer
5has so requested, shall grant the taxpayer or his authorized
6representative a hearing. Following that hearing, the
7Department of Revenue shall issue a final assessment to the
8taxpayer for the amount found to be due as a result of the
9hearing.
10    If a protest to the notice of tax liability and a request
11for a hearing thereon is not filed within 60 days after receipt
12of the notice, that notice of tax liability shall become final
13without the necessity of a final assessment being issued and
14shall be deemed to be a final assessment.
15    (i) The Circuit Court of the county in which the well is
16located shall have power to review all final administrative
17decisions of the Department of Revenue in administering the
18provisions of this Section. The provisions of the
19Administrative Review Law, and the rules adopted pursuant
20thereto, shall apply to and govern all proceedings for the
21judicial review of final administrative decisions of the
22Department hereunder. The term "administrative decision" is
23defined as in Section 3-101 of the Code of Civil Procedure.
24    After the expiration of the period within which the person
25assessed may file an action for judicial review under the
26Administrative Review Law without such an action being filed, a

 

 

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1certified copy of the final assessment or revised final
2assessment of the Department may be filed with the Circuit
3Court of the county in which the well is located. The certified
4copy of the final assessment or revised final assessment shall
5be accompanied by a certification which recites facts that are
6sufficient to show that the Department of Revenue complied with
7the jurisdictional requirements of this Section in arriving at
8its final assessment or its revised final assessment and that
9the taxpayer had an opportunity for an administrative hearing
10and for judicial review. If the court is satisfied that the
11Department of Revenue complied with the jurisdictional
12requirements of this Section in arriving at its final
13assessment or its revised final assessment and that the
14taxpayer had an opportunity for an administrative hearing and
15for judicial review, the court shall render judgment in favor
16of the Department of Revenue and against the taxpayer for the
17amount shown to be due by the final assessment or the revised
18final assessment, plus any interest that may be due, and such
19judgment shall be entered in the judgment docket of the court.
20Such judgment shall bear the same rate of interest and shall
21have the same effect as other judgments. The judgment may be
22enforced, and all laws applicable to sales for the enforcement
23of a judgment shall be applicable to sales made under such
24judgments. The Department of Revenue shall file the certified
25copy of its assessment with the Circuit Court within 2 years
26after such assessment becomes final, except when the taxpayer

 

 

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1consents in writing to an extension of the filing period, and
2except that the time limitation period on the Department of
3Revenue's right to file the certified copy of its assessment
4with the Circuit Court shall not run during any period of time
5in which the order of any court has the effect of enjoining or
6restraining the Department of Revenue from filing such
7certified copy of its assessment with the Circuit Court.
8    (j) Every interest owner, producer, operator, storage
9operator, and first purchaser shall keep such records,
10receipts, invoices and other pertinent books, documents,
11memoranda and papers as the Department of Revenue shall
12require, in such form as the Department of Revenue shall
13require in order to administer and enforce this Section. The
14Department of Revenue may adopt rules that establish
15requirements, including record forms and formats, for records
16required to be kept and maintained by taxpayers. For purposes
17of this Section, "records" means all data maintained by the
18taxpayer, including data on paper, microfilm, microfiche, or on
19any type of machine-sensible data compilation. For the purpose
20of administering and enforcing the provisions hereof, the
21Department of Revenue, or any officer or employee of the
22Department of Revenue designated, in writing, by the Director
23thereof, may hold investigations and hearings concerning any
24matters covered herein and may examine any relevant books,
25papers, records, documents, or memoranda of any serviceman or
26any taxable purchaser for use hereunder, and may require the

 

 

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1attendance of such person or any officer or employee of such
2person, or of any person having knowledge of the facts, and may
3take testimony and require proof for its information.
4    (k) The Department of Revenue is authorized to make,
5promulgate, and enforce reasonable rules relating to the
6administration and enforcement of this Section.
 
7    Section 99. Effective date. This Act takes effect upon
8becoming law.".