Monday, February 15, 2016

West Virginia Legislature Considers New Legislation to Amend Severance Tax on Natural Gas Production

On January 28, 2016, West Virginia Senator Jeffrey V. Kessler introduced Senate Bill No. 419 to the General Assembly “relating to termination of Workers’ Compensation Debt Reduction Act.” The principal purpose of the bill is to terminate privilege taxes imposed on severing or producing natural gas in addition to the state severance tax.

The Workers’ Compensation Debt Reduction Act imposed an additional tax of 4.7 cents per thousand cubic feet on natural gas at point of production. The Act also imposed 56 cents per ton on coal production. Under this bill, those additional taxes would be terminated on and after July 1, 2016. According to a Fiscal Note Summary, “passage of this bill would reduce the current cash flow into the Old Worker’s Compensation Debt Fund . . . one of the objectives behind the provisions of this bill is to more carefully target long-term [Old Worker’s Compensation Debt Fund] revenues to closely match long term Old Fund liabilities.”

The bill passed the Senate on February 11, 2016, and was referred to the House Finance Committee the next day. If the bill passes, natural resources producers would still be required to pay a severance tax of 5% of gross value for oil and natural gas.

Writing by Chloe Marie - Research Fellow

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