2005 Senate Bill text for SB0015

SENATE BILL 15

47th legislature - STATE OF NEW MEXICO - first special session, 2005

INTRODUCED BY

Cisco McSorley

AN ACT

RELATING TO ENERGY; IMPOSING AN OIL AND GAS SEVERANCE SURTAX UNDER CERTAIN CONDITIONS; CREATING THE COMMUNITY ENERGY SECURITY FUND; PROVIDING FOR GRANTS FROM THE FUND TO LOCAL GOVERNMENTS AND INSTITUTIONS OF HIGHER EDUCATION FOR THE PURPOSE OF ENERGY CONSERVATION; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-1-6.23 NMSA 1978 (being Laws 1985, Chapter 65, Section 9, as amended) is amended to read:

"7-1-6.23. DISTRIBUTION TO SEVERANCE TAX BONDING FUND AND COMMUNITY ENERGY SECURITY FUND.--

A. Except as provided in Subsection B of this section, a distribution pursuant to Section 7-1-6.20 NMSA 1978 shall be made to the severance tax bonding fund of the net receipts attributable to the taxes and advance payment imposed pursuant to the Severance Tax Act and the Oil and Gas Severance Tax Act.

B. A distribution pursuant to Section 7-1-6.20 NMSA 1978 shall be made to the community energy security fund of the net receipts attributable to the oil and gas severance surtax imposed pursuant to Section 7-29-24 NMSA 1978 and any advance payment of the oil and gas severance surtax."

Section 2. Section 7-27-2 NMSA 1978 (being Laws 1961, Chapter 5, Section 3, as amended) is amended to read:

"7-27-2. SEVERANCE TAX BONDING FUND CREATED.--There is created the "severance tax bonding fund" into which shall be distributed, in accordance with the Tax Administration Act, the net receipts from taxes levied upon natural resource products severed and saved from the soil in accordance with the provisions of the Severance Tax Act and, excluding net receipts attributable to the oil and gas severance surtax, the Oil and Gas Severance Tax Act and into which shall be deposited such other money as the legislature may from time to time determine."

Section 3. A new section of the Oil and Gas Severance Tax Act, Section 7-29-24 NMSA 1978, is enacted to read:

"7-29-24. [NEW MATERIAL] OIL AND GAS SEVERANCE SURTAX IMPOSED--RATES--COLLECTION.--

A. In addition to the tax imposed pursuant to Section 7-29-4 NMSA 1978, there is imposed and shall be collected by the department a tax on all products that are severed and sold. The measure of the tax and the rates are:

(1) on natural gas severed and sold:

(a) if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was less than two dollars seventy cents ($2.70) per thousand cubic feet, there is no tax imposed pursuant to this paragraph;

(b) one percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than two dollars seventy cents ($2.70) per thousand cubic feet and less than four dollars twenty cents ($4.20) per thousand cubic feet;

(c) two percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than four dollars twenty cents ($4.20) per thousand cubic feet and less than five dollars seventy cents ($5.70) per thousand cubic feet;

(d) three percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than five dollars seventy cents ($5.70) per thousand cubic feet and less than seven dollars twenty cents ($7.20) per thousand cubic feet;

(e) four percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than seven dollars twenty cents ($7.20) per thousand cubic feet and less than eight dollars seventy cents ($8.70) per thousand cubic feet;

(f) five percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than eight dollars seventy cents ($8.70) per thousand cubic feet and less than ten dollars twenty cents ($10.20) per thousand cubic feet;

(g) six percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than ten dollars twenty cents ($10.20) per thousand cubic feet and less than eleven dollars seventy cents ($11.70) per thousand cubic feet; and

(h) seven percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of natural gas in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than eleven dollars seventy cents ($11.70) per thousand cubic feet; and

(2) on oil and on other liquid hydrocarbons removed from natural gas at or near the wellhead:

(a) if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was less than twenty-two dollars ($22.00) per barrel, there is no tax imposed pursuant to this paragraph;

(b) one percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than twenty-two dollars ($22.00) per barrel and less than twenty-seven dollars ($27.00) per barrel;

(c) two percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than twenty-seven dollars ($27.00) per barrel and less than thirty-two dollars ($32.00) per barrel;

(d) three percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than thirty-two dollars ($32.00) per barrel and less than thirty-seven dollars ($37.00) per barrel;

(e) four percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than thirty-seven dollars ($37.00) per barrel and less than forty-two dollars ($42.00) per barrel;

(f) five percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than forty-two dollars ($42.00) per barrel and less than forty-seven dollars ($47.00) per barrel;

(g) six percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than forty-seven dollars ($47.00) per barrel and less than fifty-two dollars ($52.00) per barrel; and

(h) seven percent of the taxable value determined pursuant to Section 7-29-4.1 NMSA 1978 if the average annual taxable value of oil in the calendar year preceding July 1 of the fiscal year in which the tax rate is to be imposed was equal to or more than fifty-two dollars ($52.00).

B. Every interest owner shall be liable for the tax to the extent of the owner's interest in such products. An Indian tribe, Indian pueblo or Indian shall be liable for the tax to the extent authorized or permitted by law.

C. The tax imposed by this section may be referred to as the "oil and gas severance surtax"; provided that, except as provided in Section 7-29-4 NMSA 1978 and in this section, any reference in the NMSA 1978 to the "oil and gas severance tax" shall be deemed to include both the oil and gas severance tax imposed pursuant to Section 7-29-4 NMSA 1978 and the oil and gas severance surtax."

Section 4. Section 7-29A-2 NMSA 1978 (being Laws 1992, Chapter 38, Section 2) is amended to read:

"7-29A-2. DEFINITIONS.--As used in the Enhanced Oil Recovery Act:

A. "crude oil" means oil and other liquid hydrocarbons removed from natural gas at or near the wellhead;

B. "division" means the oil conservation division of the energy, minerals and natural resources department;

C. "enhanced recovery project" means the use or the expanded use of any process for the displacement of crude oil from an oil well or pool classified by the division pursuant to Paragraph (11) of Subsection B of Section 70-2-12 NMSA 1978 other than a primary recovery process, including but not limited to the use of a pressure maintenance process, a water flooding process, an immiscible, miscible, chemical, thermal or biological process or any other related process;

D. "expansion or expanded use" means a significant change or modification, as determined by the [oil conservation] division in:

(1) the technology or process used for the displacement of crude oil from an oil well or pool classified by the division pursuant to Paragraph (11) of Subsection B of Section 70-2-12 NMSA 1978; or

(2) the expansion, extension or increase in size of the geologic area or adjacent geologic area that could reasonably be determined to represent a new or unique area of activity;

E. "operator" means the person responsible for the actual physical operation of an enhanced recovery project;

F. "person" means any individual, estate, trust, receiver, business trust, corporation, firm, copartnership, cooperative, joint venture, association or other group or combination acting as a unit, and the plural as well as the singular number;

G. "positive production response" means that the rate of oil production from the wells or pools affected by an enhanced recovery project is greater than the rate that would have occurred without the project;

H. "primary recovery" means the displacement of crude oil from an oil well or pool classified by the division pursuant to Paragraph (11) of Subsection B of Section 70-2-12 NMSA 1978 into the well bore by means of the natural pressure of the oil well or pool, including but not limited to artificial lift;

I. "recovered oil tax rate" means [that] the sum of the tax rate, [as] set forth in Paragraph (3) of Subsection A of Section 7-29-4 NMSA 1978, on crude oil produced from an enhanced recovery project plus the applicable oil and gas severance surtax rate imposed pursuant to Section 7-29-24 NMSA 1978;

J. "secondary recovery project" means an enhanced recovery project that:

(1) occurs subsequent to the completion of primary recovery and is not a tertiary recovery project;

(2) involves the application, in accordance with sound engineering principles, of carbon dioxide miscible fluid displacement, pressure maintenance, water flooding or any other secondary recovery method accepted and approved by the division pursuant to the provisions of Paragraph (14) of Subsection B of Section 70-2-12 NMSA 1978 that can reasonably be expected to result in an increase, determined in light of all facts and circumstances, in the amount of crude oil that may ultimately be recovered; and

(3) encompasses a pool or portion of a pool the boundaries of which can be adequately defined and controlled;

K. "severance" means the taking from the soil of any product in any manner whatsoever;

L. "termination" means the discontinuance of an enhanced recovery project by the operator; and

M. "tertiary recovery project" means an enhanced recovery project that:

(1) occurs subsequent to the completion of a secondary recovery project;

(2) involves the application, in accordance with sound engineering principles, of carbon dioxide miscible fluid displacement, pressure maintenance, water flooding or any other tertiary recovery method accepted and approved by the division pursuant to the provisions of Paragraph (14) of Subsection B of Section 70-2-12 NMSA 1978 that can reasonably be expected to result in an increase, determined in light of all facts and circumstances, in the amount of crude oil that may ultimately be recovered; and

(3) encompasses a pool or portion of a pool the boundaries of which can be adequately defined and controlled."

Section 5. Section 7-29B-2 NMSA 1978 (being Laws 1995, Chapter 15, Section 2, as amended by Laws 1999, Chapter 7, Section 2 and also by Laws 1999, Chapter 256, Section 3) is amended to read:

"7-29B-2. DEFINITIONS.--As used in the Natural Gas and Crude Oil Production Incentive Act:

A. "average annual taxable value" means the average of the taxable value per barrel, determined pursuant to Section 7-31-5 NMSA 1978, of all oil produced in New Mexico for the specified calendar year as determined by the department;

B. "average daily production" means, for any crude oil or natural gas property assigned a single production number by the department, the number derived by dividing the total volume of crude oil or natural gas production from the property reported to the division during a calendar year by the sum of the number of days each eligible well within the property produced or injected during that calendar year;

C. "department" means the taxation and revenue department;

D. "division" means the oil conservation division of the energy, minerals and natural resources department;

E. "eligible well" means a crude oil or natural gas well that produces or an injection well that injects and is integral to production for any period of time during the preceding calendar year;

F. "natural gas" means any combustible vapor composed chiefly of hydrocarbons occurring naturally;

G. "operator" means the person responsible for the actual physical operation of a natural gas or oil well;

H. "person" means any individual or other legal entity, including any group or combination of individuals or other legal entities acting as a unit;

I. "production restoration incentive tax exemption" means the tax exemption set forth in Subsection B of Section 7-29-4 NMSA 1978 for natural gas or oil produced from a production restoration project;

J. "production restoration project" means the use of any process for returning to production a natural gas or oil well that had thirty days or less of production in any period of twenty-four consecutive months beginning on or after January 1, 1993 as approved and certified by the division;

K. "severance" means the taking from the soil of any product in any manner whatsoever;

L. "stripper well property" means a crude oil or natural gas producing property that is assigned a single production unit number by the department and:

(1) if a crude oil producing property, produced an average daily production of less than ten barrels of oil per eligible well per day for the preceding calendar year;

(2) if a natural gas producing property, produced an average daily production of less than sixty thousand cubic feet of natural gas per eligible well per day during the preceding calendar year; or

(3) if a property with wells that produce both crude oil and natural gas, produced an average daily production of less than ten barrels of oil per eligible well per day for the preceding calendar year, as determined by converting the volume of natural gas produced by the well to barrels of oil by using a ratio of six thousand cubic feet to one barrel of oil;

M. "stripper well incentive tax rates" means the tax rates set forth in Paragraphs (6) through (9) of Subsection A of Section 7-29-4 NMSA 1978 and in Paragraphs (4) through (7) of Subsection A of Section 7-31-4 NMSA 1978 for natural gas or oil produced from a well within a stripper well property;

N. "well workover incentive tax rate" means the sum of the tax rate set forth in Paragraphs (4) and (5) of Subsection A of Section 7-29-4 NMSA 1978 on the natural gas or oil produced from a well workover project plus the applicable oil and gas severance surtax rate imposed pursuant to Section 7-29-24 NMSA 1978; and

O. "well workover project" means any procedure undertaken by the operator of a natural gas or oil well that is intended to increase the production from the well and that has been approved and certified by the division."

Section 6. [NEW MATERIAL] COMMUNITY ENERGY SECURITY FUND--GRANTS TO COUNTIES, MUNICIPALITIES AND INSTITUTIONS OF HIGHER EDUCATION.--

A. The "community energy security fund" is created in the state treasury and shall be administered by the department of finance and administration. The fund shall consist of tax distributions to the fund, money appropriated and transferred to the fund and gifts, grants, donations and bequests. Earnings from investment of the fund shall be credited to the fund. Money in the fund is appropriated to the department for the purpose of carrying out the provisions of this section; provided that no more than an amount equal to one percent of the total grants made from the fund during a fiscal year shall be used for administrative costs. Any unexpended or unencumbered balance remaining at the end of a fiscal year shall not revert.

B. Upon application to the department and contingent upon the availability of fund balances, money in the community energy security fund shall be used to make grants to municipalities, counties and public institutions of higher education to conduct studies on the economic impact of high energy costs.

(1) For a municipality or county, an economic impact study shall include:

(a) a determination of the number of households within the municipality or the unincorporated area of the county that have total energy costs exceeding six percent of the household income;

(b) a characterization of the type and number of locally owned businesses within the municipality or the unincorporated area of the county, including those businesses involved with agriculture, that are most vulnerable to rising energy costs, including sample calculations of energy cost burden as a percentage of revenues; and

(c) a description of the total energy costs to the municipality or county, including the costs for using public buildings, operating public utilities, transportation costs and other energy loads for which the municipality or county is responsible.

(2) For an institution of higher education, an economic impact study shall include data that characterizes the total energy costs for buildings, transportation and other energy loads for which the institution is responsible.

C. Contingent upon the availability of fund balances and upon the completion and submission of an economic impact study and a further application to the department, money in the community energy security fund shall be used to make implementation grants:

(1) to a municipality or county for the purpose of installing and utilizing energy conservation measures that will lower the energy costs of:

(a) those households identified in the economic impact study as those having a high energy burden;

(b) those locally owned businesses identified in the economic impact study as those being most vulnerable to high energy costs; and

(2) to an institution of higher education for the purpose of installing and utilizing energy conservation measures that will lower the energy costs to the institution.

D. The department shall promulgate such rules as are necessary to carry out the provisions of this section, including requirements for grant applications; procedures for accepting, reviewing and prioritizing the grant applications; and requirements for monitoring program results. The department shall coordinate activities conducted pursuant to this section with those conducted under the low-income home energy assistance program and those conducted pursuant to the Public Facility Energy Efficiency and Water Conservation Act.

E. As used in this section:

(1) "department" means the department of finance and administration; and

(2) "energy conservation measure" means a training program or a modification to a facility, including buildings, systems or vehicles, that is designed to reduce energy consumption or conservation-related operating costs and may include:

(a) insulation of the building structure or systems within the building;

(b) storm windows or doors, caulking or weatherstripping, multiglazed windows or doors, heat-absorbing or heat-reflective glazed and coated window or door systems, additional glazing, reductions in glass area or other window and door system modifications that reduce energy consumption; (c) automated or computerized energy control systems;

(d) heating, ventilating or air conditioning system modifications or replacements;

(e) replacement or modification of lighting fixtures to increase the energy efficiency of the lighting system without increasing the overall illumination of a facility, unless an increase in illumination is necessary to conform to the applicable state or local building code or nationally accepted standards for the lighting system after the proposed modifications are made;

(f) energy recovery systems;

(g) solar heating and cooling systems or other high efficiency sustainable energy systems;

(h) cogeneration or combined heat and power systems that produce steam, chilled water or forms of energy such as heat, as well as electricity, for use primarily within a building or complex of buildings;

(i) energy conservation measures that provide long-term operating cost reductions;

(j) maintenance and operation management systems that provide long-term operating cost reductions;

(k) traffic control systems; or

(l) alternative fuel options or accessories for vehicles.

Section 7. EFFECTIVE DATE.--The effective date of the provisions of this act is February 1, 2006.

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