Bill Text: IL HB4312 | 2011-2012 | 97th General Assembly | Amended

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Bill Title: Amends the Public Utilities Act. Makes a technical change in the short title Section.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2013-01-08 - Session Sine Die [HB4312 Detail]

Download: Illinois-2011-HB4312-Amended.html

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Rep. Naomi D. Jakobsson

Filed: 3/21/2012

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AMENDMENT TO HOUSE BILL 4312
AMENDMENT NO. ______. Amend House Bill 4312 by replacing
everything after the enacting clause with the following:
"Section 5. The Illinois Oil and Gas Act is amended by
changing Section 1 and by adding Section 29 as follows:
(225 ILCS 725/1) (from Ch. 96 1/2, par. 5401)
Sec. 1. Unless the context otherwise requires, the words
defined in this Section have the following meanings as used in
this Act.
"Person" means any natural person, corporation,
association, partnership, governmental agency or other legal
entity, receiver, trustee, guardian, executor, administrator,
fiduciary or representative of any kind.
"Oil" means natural crude oil or petroleum and other
hydrocarbons, regardless of gravity, which are produced at the
well in liquid form by ordinary production methods or by the

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

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coverage has been provided for 2 consecutive years; (2) no oil
or gas has been produced from the well or from the lease or
unit on which the well is located for 2 consecutive years; and
(3) no permittee or owner can be identified or located by the
Department. Orphaned wells include wells that may have been
drilled for purposes other than those for which a permit is
required under this Act if the well is a conduit for oil or
salt water intrusions into fresh water zones or onto the
surface which may be caused by oil and gas operations.
"Owner" means the person who has the right to drill into
and produce from any pool, and to appropriate the production
either for the person or for the person and another, or others,
or solely for others, excluding the mineral owner's royalty if
the right to drill and produce has been granted under an oil
and gas lease. An owner may also be a person granted the right
to drill and operate an injection (Class II UIC) well
independent of the right to drill for and produce oil or gas.
When the right to drill, produce, and appropriate production is
held by more than one person, then all persons holding these
rights may designate the owner by a written operating agreement
or similar written agreement. In the absence of such an
agreement, and subject to the provisions of Sections 22.2 and
23.1 through 23.16 of this Act, the owner shall be the person
designated in writing by a majority in interest of the persons
holding these rights.
"Department" means the Department of Natural Resources.

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"Director" means the Director of Natural Resources.
"Mining Board" means the State Mining Board in the
Department of Natural Resources, Office of Mines and Minerals.
"Mineral Owner's Royalty" means the share of oil and gas
production reserved in an oil and gas lease free of all costs
by an owner of the minerals whether denominated royalty or
overriding royalty.
"Waste" means "physical waste" as that term is generally
understood in the oil and gas industry, and further includes:
(1) the locating, drilling and producing of any oil or
gas well or wells drilled contrary to the valid order,
rules and regulations adopted by the Department under the
provisions of this Act.
(2) permitting the migration of oil, gas, or water from
the stratum in which it is found, into other strata,
thereby ultimately resulting in the loss of recoverable
oil, gas or both;
(3) the drowning with water of any stratum or part
thereof capable of producing oil or gas, except for
secondary recovery purposes;
(4) the unreasonable damage to underground, fresh or
mineral water supply, workable coal seams, or other mineral
deposits in the operations for the discovery, development,
production, or handling of oil and gas;
(5) the unnecessary or excessive surface loss or
destruction of oil or gas resulting from evaporation,

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seepage, leakage or fire, especially such loss or
destruction incident to or resulting from the escape of gas
into the open air in excessive or unreasonable amounts,
provided, however, it shall not be unlawful for the
operator or owner of any well producing both oil and gas to
burn such gas in flares when such gas is, under the other
provisions of this Act, lawfully produced, and where there
is no market at the well for such escaping gas; and where
the same is used for the extraction of casinghead gas, it
shall not be unlawful for the operator of the plant after
the process of extraction is completed, to burn such
residue in flares when there is no market at such plant for
such residue gas;
(6) permitting unnecessary fire hazards;
(7) permitting unnecessary damage to or destruction of
the surface, soil, animal, fish or aquatic life or property
from oil or gas operations.
"Drilling Unit" means the surface area allocated by an
order or regulation of the Department to the drilling of a
single well for the production of oil or gas from an individual
pool.
"Enhanced Recovery Method" means any method used in an
effort to recover hydrocarbons from a pool by injection of
fluids, gases or other substances to maintain, restore or
augment natural reservoir energy, or by introducing immiscible
or miscible gases, chemicals, other substances or heat or by

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in-situ combustion, or by any combination thereof.
"Well-Site Equipment" means any production-related
equipment or materials specific to the well, including motors,
pumps, pump jacks, tanks, tank batteries, separators,
compressors, casing, tubing, and rods.
"First purchaser" means any person who completes an initial
purchase of oil or gas from a well in Illinois.
"Interest owner" means a person who owns or possesses an
interest in the gross production of oil or gas produced from a
well in Illinois.
(Source: P.A. 89-243, eff. 8-4-95; 89-445, eff. 2-7-96.)
(225 ILCS 725/29 new)
Sec. 29. Oil and gas production tax.
(a) On and after January 1, 2013, in addition to any other
tax, fee, or levy imposed by the State or any unit of local
government in this State, a tax is levied upon the privilege of
producing oil and gas from the earth or water in this State for
sale, transport, storage, profit, or commercial use.
(b) The tax levied under this Section on gas shall be equal
to the greater of (i) 12% of the gross value of the gas at the
point of production or (ii) $0.36 per 1,000 cubic feet of gas
produced. The tax levied under this Section on oil shall be
equal to the greater of (i) 12% of the gross value of the oil at
the point of production or (ii) $2.88 per barrel of oil
produced.

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

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

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

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

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certified copy of the final assessment or revised final
assessment of the Department may be filed with the Circuit
Court of the county in which the well is located. The certified
copy of the final assessment or revised final assessment shall
be accompanied by a certification which recites facts that are
sufficient to show that the Department of Revenue complied with
the jurisdictional requirements of this Section in arriving at
its final assessment or its revised final assessment and that
the taxpayer had an opportunity for an administrative hearing
and for judicial review. If the court is satisfied that the
Department of Revenue complied with the jurisdictional
requirements of this Section in arriving at its final
assessment or its revised final assessment and that the
taxpayer had an opportunity for an administrative hearing and
for judicial review, the court shall render judgment in favor
of the Department of Revenue and against the taxpayer for the
amount shown to be due by the final assessment or the revised
final assessment, plus any interest that may be due, and such
judgment shall be entered in the judgment docket of the court.
Such judgment shall bear the same rate of interest and shall
have the same effect as other judgments. The judgment may be
enforced, and all laws applicable to sales for the enforcement
of a judgment shall be applicable to sales made under such
judgments. The Department of Revenue shall file the certified
copy of its assessment with the Circuit Court within 2 years
after such assessment becomes final, except when the taxpayer

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

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