CHARLESTON, W.Va. - A bill to repeal severance tax exemptions for some natural gas wells appears to be taking the fast track through the state Senate, being endorsed by that chamber's Energy, Industry and Mining Committee only one day after it was introduced.
But state Tax Department officials say changes during that first committee appearance significantly limited the bill's scope.
While Senate Bill 638 was introduced only Monday, Senate Energy Chairman Doug Facemire, D-Braxton, put it on his committee's Tuesday morning agenda.
In its original incarnation, the bill would have repealed a 13-year-old law allowing owners of inactive gas wells to avoid paying severance taxes for the first 10 years after the wells were reopened.
The bill would preserve tax exemptions for any natural gas well owner already covered by the existing law, but any additional out-of-production wells brought online after July 1, 2013, would not receive the exemption.
Committee members unanimously voted to amend the bill, however, preserving the tax exemptions for owners of low-production gas wells but eliminating the incentives for larger horizontal-drilling operations.
Deputy Revenue Secretary Mark Muchow said while lawmakers obviously want to protect tax exemptions for the state's smaller natural gas operations, 90 percent of the state's gas wells are so-called "shallow" wells. Those operations make up about 31 percent of the state's natural gas production, he said.
Legislators in 2000 passed the tax exemptions to encourage owners of low-production, "shallow" natural gas wells to bring those wells back into production. The tax exemption applied only to wells that had been inactive for five years or longer.
Now, the state Tax Department wants those severance tax exemptions repealed because of changes in West Virginia's natural gas market.
Muchow said in 2011 the state failed to receive about $6.6 million in potential severance tax revenue because of the exemption. He said that amount likely will increase as the state's natural gas industry continues to grow.