H. B. No. 212 As Introduced

As Introduced

130th General Assembly

Regular Session

2013-2014

H. B. No. 212

Representative Hagan, R.

Cosponsors: Representatives Foley, Patterson, Boyd

A BILL

To amend sections 1509.02, 1509.071, 5749.01, and

5749.02 and to enact sections 190.01, 190.02,

190.03, 109.04, 190.05, 1509.074, and 5749.18 of

the Revised Code to levy a tax on the severance of

oil, gas, condensate, and natural gas liquids from

horizontal wells, to distribute revenue from the

tax to environmental and oil and gas regulatory

purposes, local governments impacted and not

impacted by horizontal well development, and a

permanent fund to promote economic development,

and to provide for the administration, investment,

and use of the permanent fund.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 1509.02, 1509.071, 5749.01, and	13
5749.02 be amended and sections 190.01, 190.02, 190.03, 109.04,	14
190.05, 1509.074, and 5749.18 of the Revised Code be enacted to	15
read as follows:	16

Sec. 190.01. There is hereby created the severance tax trust	17
fund, which shall be in the custody of the treasurer of state but	18
shall not be part of the state treasury. Moneys received from the	19
tax levied in divisions (A)(10) and (11) of section 5749.02 of the	20
Revised Code shall be deposited in the fund in accordance with	21
division (B) of that section. Except as provided in section 190.04	22
of the Revised Code, money in the fund may not be appropriated by	23
the general assembly except upon approval of four-fifths of the	24
membership of the house of representatives and of the senate.	25
Money in the fund so appropriated may be used for any purpose.	26
Otherwise, money in the fund shall be used in accordance with	27
section 190.04 of the Revised Code.	28

Sec. 190.02. (A) The general administration, management, and	29
investment of the severance tax trust fund are hereby vested in a	30
board to be known as the "severance tax trust board," which shall	31
be composed of the following members:	32

(1) The treasurer of state;

(2) One member of the public who is a representative of the	34
oil and gas industry;	35

(3) One member of the public who is a representative of a	36
statewide environmental organization;	37

(4) Six members of the public, each of whom shall have direct	38
experience in the management, analysis, supervision, or investment	39
of financial assets.	40

(B) The members described in divisions (A)(2) to (4) of this	41
section shall be appointed by the governor with the advice and	42
consent of the senate and may be removed by the governor for good	43
cause. Such members may be reappointed, but may not serve more	44
than two consecutive terms on the board.	45

Each member described in divisions (A)(2) and (3) of this	46
section shall serve a four-year term. Of the members described in	47
division (A)(4) of this section, for the first term occurring	48
after the effective date of this section:	49

(1) Two members shall serve a three-year term;

(2) Two members shall serve a two-year term; and

(3) Two members shall serve a one-year term.

For every term thereafter, members described in division	53
(A)(4) of this section shall serve four-year terms. Any member	54
appointed to the board under this section shall hold office until	55
the later of the end of the term for which the member is appointed	56
or the date the member's successor takes office. A vacancy	57
occurring among the members shall be filled in the same manner as	58
the original appointment.	59

(C) At the first meeting, which shall occur not later than	60
one year after the effective date of this section, members of the	61
board shall elect a chair. The board shall meet annually or more	62
frequently at the call of the chair. A majority of the board	63
constitutes a quorum.The board is a public body for purposes of	64
section 121.22 of the Revised Code. Records of the board are	65
public records for purposes of section 149.43 of the Revised Code.	66

(D) The board may hire staff to assist the board in the	67
conduct of its duties under this chapter. The staff of the	68
severance tax trust board are in the unclassified service. The	69
director of administrative services shall fix the compensation of	70
the staff.	71

(E) Compensation of the members, except for the treasurer of	72
state, shall be in accordance with division (J) of section 124.15	73
of the Revised Code. In addition to such compensation, all members	74
shall be reimbursed for their necessary expenses incurred in the	75
performance of their work as members.	76

(F) The board shall prepare and submit an operating budget	77
for each fiscal year. Expenses incurred by the board in	78
administering this chapter shall be paid from the severance tax	79
trust administrative fund.	80

(G) There is hereby created the severance tax trust	81
administrative fund, which shall be in the custody of the	82
treasurer of state but shall not be part of the state treasury.	83
Money received from the tax levied in divisions (A)(10) and (11)	84
of section 5749.02 of the Revised Code shall be deposited in the	85
fund in accordance with division (B) of that section. Money in the	86
fund shall be used to pay the expenses of the severance tax trust	87
board in administering this chapter. Before the end of each fiscal	88
year, the severance tax trust board shall transfer any money in	89
the fund in excess of that included in the board's operating	90
budget for that fiscal year to the severance tax trust fund. The	91
board shall not appropriate or encumber money in the severance tax	92
trust fund.	93

Sec. 190.03. (A) The severance tax trust board and the	94
board's staff, in managing and investing the assets of the	95
severance tax trust fund, shall exercise the judgment and care	96
under the circumstances then prevailing that an institutional	97
investor of ordinary prudence, discretion, and intelligence	98
exercises in the designation and management of large investments	99
entrusted to it, not in regard to speculation, but in regard to	100
the permanent disposition of funds, considering preservation of	101
the purchasing power of the fund over time while maximizing the	102
expected total return from both income and the appreciation of	103
capital.	104

(B) Not later than one year after the effective date of this	105
section, the board shall do each of the following:	106

(1) Establish a statement of investment policies and	107
guidelines, including the board's overall investment philosophy	108
and other related policies as necessary for the effective	109
management and investment of the assets of the fund;	110

(2) Establish a framework or process for the management of	111
the investment risk of the fund;	112

(3) Approve the long-term or strategic asset allocation of	113
the fund in terms of the proportion of total assets to be invested	114
on average over time in the various asset classes or risk	115
categories, as well as the minimum-maximum range within which the	116
assets can be allocated at any point in time;	117

(4) Establish an investment management structure for the fund	118
and proportion of assets in an asset class to be managed by	119
external investment managers versus the board's staff.	120

Sec. 190.04. Beginning in fiscal year 2020, the general	121
assembly may appropriate money from the severance tax trust fund	122
to provide funding for economic diversification projects,	123
education, workforce development, federal matching grants, and	124
higher education. The amount that the general assembly may	125
appropriate in each fiscal year from the fund shall not exceed	126
amounts equal to the following:	127

(A) For fiscal year 2020, one per cent of the investment	128
earnings of the fund in the preceding fiscal year;	129

(B) For fiscal year 2021, two per cent of the investment	130
earnings of the fund in the preceding two fiscal years, divided by	131
two;	132

(C) For fiscal year 2022, three per cent of the investment	133
earnings of the fund in the preceding three fiscal years, divided	134
by three;	135

(D) For fiscal year 2023, four per cent of the investment	136
earnings of the fund in the preceding four fiscal years, divided	137
by four;	138

(E) For fiscal year 2024 and every fiscal year thereafter,	139
five per cent of the investment earnings of the fund in the	140
preceding five fiscal years, divided by five.	141

Sec. 190.05. On or before the first day of December of each	142
year, the severance tax trust board shall submit to the governor,	143
the speaker and minority leader of the house of representatives,	144
and the president and minority leader of the senate	145
recommendations for legislation to improve the severance tax trust	146
fund.	147

Sec. 1509.02. There is hereby created in the department of	148
natural resources the division of oil and gas resources	149
management, which shall be administered by the chief of the	150
division of oil and gas resources management. The division has	151
sole and exclusive authority to regulate the permitting, location,	152
and spacing of oil and gas wells and production operations within	153
the state, excepting only those activities regulated under federal	154
laws for which oversight has been delegated to the environmental	155
protection agency and activities regulated under sections 6111.02	156
to 6111.029 of the Revised Code. The regulation of oil and gas	157
activities is a matter of general statewide interest that requires	158
uniform statewide regulation, and this chapter and rules adopted	159
under it constitute a comprehensive plan with respect to all	160
aspects of the locating, drilling, well stimulation, completing,	161
and operating of oil and gas wells within this state, including	162
site construction and restoration, permitting related to those	163
activities, and the disposal of wastes from those wells. In order	164
to assist the division in the furtherance of its sole and	165
exclusive authority as established in this section, the chief may	166
enter into cooperative agreements with other state agencies for	167
advice and consultation, including visitations at the surface	168
location of a well on behalf of the division. Such cooperative	169
agreements do not confer on other state agencies any authority to	170
administer or enforce this chapter and rules adopted under it. In	171
addition, such cooperative agreements shall not be construed to	172
dilute or diminish the division's sole and exclusive authority as	173
established in this section. Nothing in this section affects the	174
authority granted to the director of transportation and local	175
authorities in section 723.01 or 4513.34 of the Revised Code,	176
provided that the authority granted under those sections shall not	177
be exercised in a manner that discriminates against, unfairly	178
impedes, or obstructs oil and gas activities and operations	179
regulated under this chapter.	180

The chief shall not hold any other public office, nor shall	181
the chief be engaged in any occupation or business that might	182
interfere with or be inconsistent with the duties as chief.	183

All moneys collected by the chief pursuant to sections	184
1509.06, 1509.061, 1509.062, 1509.071, 1509.13, 1509.22, 1509.222,	185
1509.28, 1509.34, and 1509.50 of the Revised Code, ninety per cent	186
of moneys received by the treasurer of state from the tax levied	187
in divisions (A)(5) and (6) of section 5749.02 of the Revised	188
Code, four per cent of money received by the treasurer of state	189
from the tax levied in divisions (A)(10) and (11) of section	190
5749.02 of the Revised Code, all civil penalties paid under	191
section 1509.33 of the Revised Code, and, notwithstanding any	192
section of the Revised Code relating to the distribution or	193
crediting of fines for violations of the Revised Code, all fines	194
imposed under divisions (A) and (B) of section 1509.99 of the	195
Revised Code and fines imposed under divisions (C) and (D) of	196
section 1509.99 of the Revised Code for all violations prosecuted	197
by the attorney general and for violations prosecuted by	198
prosecuting attorneys that do not involve the transportation of	199
brine by vehicle shall be deposited into the state treasury to the	200
credit of the oil and gas well fund, which is hereby created.	201
Fines imposed under divisions (C) and (D) of section 1509.99 of	202
the Revised Code for violations prosecuted by prosecuting	203
attorneys that involve the transportation of brine by vehicle and	204
penalties associated with a compliance agreement entered into	205
pursuant to this chapter shall be paid to the county treasury of	206
the county where the violation occurred.	207

The fund shall be used solely and exclusively for the	208
purposes enumerated in division (B) of section 1509.071 of the	209
Revised Code, for the expenses of the division associated with the	210
administration of this chapter and Chapter 1571. of the Revised	211
Code and rules adopted under them, and for expenses that are	212
critical and necessary for the protection of human health and	213
safety and the environment related to oil and gas production in	214
this state. The expenses of the division in excess of the moneys	215
available in the fund shall be paid from general revenue fund	216
appropriations to the department.	217

Sec. 1509.071. (A) When the chief of the division of oil and	218
gas resources management finds that an owner has failed to comply	219
with a final nonappealable order issued or compliance agreement	220
entered into under section 1509.04, the restoration requirements	221
of section 1509.072, plugging requirements of section 1509.12, or	222
permit provisions of section 1509.13 of the Revised Code, or rules	223
and orders relating thereto, the chief shall make a finding of	224
that fact and declare any surety bond filed to ensure compliance	225
with those sections and rules forfeited in the amount set by rule	226
of the chief. The chief thereupon shall certify the total	227
forfeiture to the attorney general, who shall proceed to collect	228
the amount of the forfeiture. In addition, the chief may require	229
an owner, operator, producer, or other person who forfeited a	230
surety bond to post a new surety bond in the amount of fifteen	231
thousand dollars for a single well, thirty thousand dollars for	232
two wells, or fifty thousand dollars for three or more wells.	233

In lieu of total forfeiture, the surety or owner, at the	234
surety's or owner's option, may cause the well to be properly	235
plugged and abandoned and the area properly restored or pay to the	236
treasurer of state the cost of plugging and abandonment.	237

(B) All moneys collected because of forfeitures of bonds as	238
provided in this section shall be deposited in the state treasury	239
to the credit of the oil and gas well fund created in section	240
1509.02 of the Revised Code.	241

The chief annually shall spend not less than fourteen per	242
cent of the revenue credited to the fund from sources other than	243
from the tax levied in divisions (A)(10) and (11) of section	244
5749.02 of the Revised Code during the previous fiscal year and	245
all of the revenue credited to the fund from the tax levied in	246
those divisions during the previous fiscal year for the following	247
purposes:	248

(1) In accordance with division (D) of this section, to plug	249
idle and orphaned wells or to restore the land surface properly as	250
required in section 1509.072 of the Revised Code;	251

(2) In accordance with division (E) of this section, to	252
correct conditions that the chief reasonably has determined are	253
causing imminent health or safety risks at an idle and orphaned	254
well or a well for which the owner cannot be contacted in order to	255
initiate a corrective action within a reasonable period of time as	256
determined by the chief.	257

Expenditures from the fund shall be made only for lawful	258
purposes. In addition, expenditures from the fund shall not be	259
made to purchase real property or to remove a dwelling in order to	260
access a well.	261

(C)(1) Upon determining that the owner of a well has failed	262
to properly plug and abandon it or to properly restore the land	263
surface at the well site in compliance with the applicable	264
requirements of this chapter and applicable rules adopted and	265
orders issued under it or that a well is an abandoned well for	266
which no funds are available to plug the well in accordance with	267
this chapter, the chief shall do all of the following:	268

(a) Determine from the records in the office of the county	269
recorder of the county in which the well is located the identity	270
of the owner of the land on which the well is located, the	271
identity of the owner of the oil or gas lease under which the well	272
was drilled or the identity of each person owning an interest in	273
the lease, and the identities of the persons having legal title	274
to, or a lien upon, any of the equipment appurtenant to the well;	275

(b) Mail notice to the owner of the land on which the well is	276
located informing the landowner that the well is to be plugged. If	277
the owner of the oil or gas lease under which the well was drilled	278
is different from the owner of the well or if any persons other	279
than the owner of the well own interests in the lease, the chief	280
also shall mail notice that the well is to be plugged to the owner	281
of the lease or to each person owning an interest in the lease, as	282
appropriate.	283

(c) Mail notice to each person having legal title to, or a	284
lien upon, any equipment appurtenant to the well, informing the	285
person that the well is to be plugged and offering the person the	286
opportunity to plug the well and restore the land surface at the	287
well site at the person's own expense in order to avoid forfeiture	288
of the equipment to this state.	289

(2) If none of the persons described in division (C)(1)(c) of	290
this section plugs the well within sixty days after the mailing of	291
the notice required by that division, all equipment appurtenant to	292
the well is hereby declared to be forfeited to this state without	293
compensation and without the necessity for any action by the state	294
for use to defray the cost of plugging and abandoning the well and	295
restoring the land surface at the well site.	296

(D) Expenditures from the fund for the purpose of division	297
(B)(1) of this section shall be made in accordance with either of	298
the following:	299

(1) The expenditures may be made pursuant to contracts	300
entered into by the chief with persons who agree to furnish all of	301
the materials, equipment, work, and labor as specified and	302
provided in such a contract for activities associated with the	303
restoration or plugging of a well as determined by the chief. The	304
activities may include excavation to uncover a well, geophysical	305
methods to locate a buried well when clear evidence of leakage	306
from the well exists, cleanout of wellbores to remove material	307
from a failed plugging of a well, plugging operations,	308
installation of vault and vent systems, including associated	309
engineering certifications and permits, restoration of property,	310
and repair of damage to property that is caused by such	311
activities. Expenditures shall not be used for salaries,	312
maintenance, equipment, or other administrative purposes, except	313
for costs directly attributed to the plugging of an idle and	314
orphaned well. Agents or employees of persons contracting with the	315
chief for a restoration or plugging project may enter upon any	316
land, public or private, on which the well is located for the	317
purpose of performing the work. Prior to such entry, the chief	318
shall give to the following persons written notice of the	319
existence of a contract for a project to restore or plug a well,	320
the names of the persons with whom the contract is made, and the	321
date that the project will commence: the owner of the well, the	322
owner of the land upon which the well is located, the owner or	323
agents of adjoining land, and, if the well is located in the same	324
township as or in a township adjacent to the excavations and	325
workings of a mine and the owner or lessee of that mine has	326
provided written notice identifying those townships to the chief	327
at any time during the immediately preceding three years, the	328
owner or lessee of the mine.	329

(2)(a) The owner of the land on which a well is located who	330
has received notice under division (C)(1)(b) of this section may	331
plug the well and be reimbursed by the division of oil and gas	332
resources management for the reasonable cost of plugging the well.	333
In order to plug the well, the landowner shall submit an	334
application to the chief on a form prescribed by the chief and	335
approved by the technical advisory council on oil and gas created	336
in section 1509.38 of the Revised Code. The application, at a	337
minimum, shall require the landowner to provide the same	338
information as is required to be included in the application for a	339
permit to plug and abandon under section 1509.13 of the Revised	340
Code. The application shall be accompanied by a copy of a proposed	341
contract to plug the well prepared by a contractor regularly	342
engaged in the business of plugging oil and gas wells. The	343
proposed contract shall require the contractor to furnish all of	344
the materials, equipment, work, and labor necessary to plug the	345
well properly and shall specify the price for doing the work,	346
including a credit for the equipment appurtenant to the well that	347
was forfeited to the state through the operation of division	348
(C)(2) of this section. Expenditures under division (D)(2)(a) of	349
this section shall be consistent with the expenditures for	350
activities described in division (D)(1) of this section. The	351
application also shall be accompanied by the permit fee required	352
by section 1509.13 of the Revised Code unless the chief, in the	353
chief's discretion, waives payment of the permit fee. The	354
application constitutes an application for a permit to plug and	355
abandon the well for the purposes of section 1509.13 of the	356
Revised Code.	357

(b) Within thirty days after receiving an application and	358
accompanying proposed contract under division (D)(2)(a) of this	359
section, the chief shall determine whether the plugging would	360
comply with the applicable requirements of this chapter and	361
applicable rules adopted and orders issued under it and whether	362
the cost of the plugging under the proposed contract is	363
reasonable. If the chief determines that the proposed plugging	364
would comply with those requirements and that the proposed cost of	365
the plugging is reasonable, the chief shall notify the landowner	366
of that determination and issue to the landowner a permit to plug	367
and abandon the well under section 1509.13 of the Revised Code.	368
Upon approval of the application and proposed contract, the chief	369
shall transfer ownership of the equipment appurtenant to the well	370
to the landowner. The chief may disapprove an application	371
submitted under division (D)(2)(a) of this section if the chief	372
determines that the proposed plugging would not comply with the	373
applicable requirements of this chapter and applicable rules	374
adopted and orders issued under it, that the cost of the plugging	375
under the proposed contract is unreasonable, or that the proposed	376
contract is not a bona fide, arm's length contract.	377

(c) After receiving the chief's notice of the approval of the	378
application and permit to plug and abandon a well under division	379
(D)(2)(b) of this section, the landowner shall enter into the	380
proposed contract to plug the well.	381

(d) Upon determining that the plugging has been completed in	382
compliance with the applicable requirements of this chapter and	383
applicable rules adopted and orders issued under it, the chief	384
shall reimburse the landowner for the cost of the plugging as set	385
forth in the proposed contract approved by the chief. The	386
reimbursement shall be paid from the oil and gas well fund. If the	387
chief determines that the plugging was not completed in accordance	388
with the applicable requirements, the chief shall not reimburse	389
the landowner for the cost of the plugging, and the landowner or	390
the contractor, as applicable, promptly shall transfer back to	391
this state title to and possession of the equipment appurtenant to	392
the well that previously was transferred to the landowner under	393
division (D)(2)(b) of this section. If any such equipment was	394
removed from the well during the plugging and sold, the landowner	395
shall pay to the chief the proceeds from the sale of the	396
equipment, and the chief promptly shall pay the moneys so received	397
to the treasurer of state for deposit into the oil and gas well	398
fund.	399

The chief may establish an annual limit on the number of	400
wells that may be plugged under division (D)(2) of this section or	401
an annual limit on the expenditures to be made under that	402
division.	403

As used in division (D)(2) of this section, "plug" and	404
"plugging" include the plugging of the well and the restoration of	405
the land surface disturbed by the plugging.	406

(E) Expenditures from the oil and gas well fund for the	407
purpose of division (B)(2) of this section may be made pursuant to	408
contracts entered into by the chief with persons who agree to	409
furnish all of the materials, equipment, work, and labor as	410
specified and provided in such a contract. The competitive bidding	411
requirements of Chapter 153. of the Revised Code do not apply if	412
the chief reasonably determines that an emergency situation exists	413
requiring immediate action for the correction of the applicable	414
health or safety risk. A contract or purchase of materials for	415
purposes of addressing the emergency situation is not subject to	416
division (B) of section 127.16 of the Revised Code. The chief,	417
designated representatives of the chief, and agents or employees	418
of persons contracting with the chief under this division may	419
enter upon any land, public or private, for the purpose of	420
performing the work.	421

(F) Contracts entered into by the chief under this section	422
are not subject to any of the following:	423

(1) Chapter 4115. of the Revised Code;

424

(2) Section 153.54 of the Revised Code, except that the	425
contractor shall obtain and provide to the chief as a bid guaranty	426
a surety bond or letter of credit in an amount equal to ten per	427
cent of the amount of the contract;	428

(3) Section 4733.17 of the Revised Code.

429

(G) The owner of land on which a well is located who has	430
received notice under division (C)(1)(b) of this section, in lieu	431
of plugging the well in accordance with division (D)(2) of this	432
section, may cause ownership of the well to be transferred to an	433
owner who is lawfully doing business in this state and who has met	434
the financial responsibility requirements established under	435
section 1509.07 of the Revised Code, subject to the approval of	436
the chief. The transfer of ownership also shall be subject to the	437
landowner's filing the appropriate forms required under section	438
1509.31 of the Revised Code and providing to the chief sufficient	439
information to demonstrate the landowner's or owner's right to	440
produce a formation or formations. That information may include a	441
deed, a lease, or other documentation of ownership or property	442
rights.	443

The chief shall approve or disapprove the transfer of	444
ownership of the well. If the chief approves the transfer, the	445
owner is responsible for operating the well in accordance with	446
this chapter and rules adopted under it, including, without	447
limitation, all of the following:	448

(1) Filing an application with the chief under section	449
1509.06 of the Revised Code if the owner intends to drill deeper	450
or produce a formation that is not listed in the records of the	451
division for that well;	452

(2) Taking title to and possession of the equipment	453
appurtenant to the well that has been identified by the chief as	454
having been abandoned by the former owner;	455

(3) Complying with all applicable requirements that are	456
necessary to drill deeper, plug the well, or plug back the well.	457

(H) The chief shall issue an order that requires the owner of	458
a well to pay the actual documented costs of a corrective action	459
that is described in division (B)(2) of this section concerning	460
the well. The chief shall transmit the money so recovered to the	461
treasurer of state who shall deposit the money in the state	462
treasury to the credit of the oil and gas well fund.	463

(I) The chief may engage in cooperative projects under this	464
section with any agency of this state, another state, or the	465
United States; any other governmental agencies; or any state	466
university or college as defined in section 3345.27 of the Revised	467
Code. A contract entered into for purposes of a cooperative	468
project is not subject to division (B) of section 127.16 of the	469
Revised Code.	470

Sec. 1509.074. There is hereby created in the state treasury	471
the oil and gas well inspection fund. Seven per cent of the money	472
from the tax levied in divisions (A)(10) and (11) of section	473
5749.02 of the Revised Code shall be credited to the fund. The	474
chief shall use money in the fund to pay for administrative costs	475
associated with conducting inspections of oil and gas wells,	476
including training and hiring individuals to conduct inspections.	477

Sec. 5749.01. As used in this chapter:

478

(A) "Ton" shall mean two thousand pounds as measured at the	479
point and time of severance, after the removal of any impurities,	480
under such rules and regulations as the tax commissioner may	481
prescribe.	482

(B) "Taxpayer" means any person required to pay the tax	483
levied by Chapter 5749. of the Revised Code.	484

(C) "Natural resource" means all forms of coal, salt,	485
limestone, dolomite, sand, gravel, ~~natural~~ gas, condensate, and	486
oil.	487

(D) "Owner," ~~has~~"well," and "horizontal well" have the same	488
~~meaning~~meanings as in section 1509.01 of the Revised Code.	489

(E) "Person" means any individual, firm, partnership,	490
association, joint stock company, corporation, or estate, or	491
combination thereof.	492

(F) "Return" means any report or statement required to be	493
filed pursuant to Chapter 5749. of the Revised Code used to	494
determine the tax due.	495

(G) "Severance" means the extraction or other removal of a	496
natural resource from the soil or water of this state.	497

(H) "Severed" means the point at which the natural resource	498
has been separated from the soil or water in this state.	499

(I) "Severer" means any person who actually removes the	500
natural resources from the soil or water in this state.	501

(J) "British thermal unit" means the measure of heat energy	502
required to raise the temperature of one pound of water by one	503
degree fahrenheit at a specified temperature.	504

(K) "Condensate" means liquid hydrocarbons that were	505
originally in the gaseous phase in the reservoir.	506

(L) "Gas" means all hydrocarbons that are in a gaseous state	507
at standard temperature and pressure.	508

Sec. 5749.02. (A) For the purpose of providing revenue to	509
administer the state's coal mining and reclamation regulatory	510
program, to meet the environmental and resource management needs	511
of this state, to provide funding for the state's oil and gas	512
regulatory program, to provide revenue to local governments, to	513
fund the severance tax trust fund, and to reclaim land affected by	514
mining, an excise tax is hereby levied on the privilege of	515
engaging in the severance of natural resources from the soil or	516
water of this state. The tax shall be imposed upon the severer and	517
shall be:	518

(1) Ten cents per ton of coal;

519

(2) Four cents per ton of salt;

520

(3) Two cents per ton of limestone or dolomite;

521

(4) Two cents per ton of sand and gravel;

522

(5) Ten cents per barrel of oil;

523

(6) Two and one-half cents per thousand cubic feet of natural	524
gas;	525

(7) One cent per ton of clay, sandstone or conglomerate,	526
shale, gypsum, or quartzite;	527

(8) Except as otherwise provided in this division or in rules	528
adopted by the reclamation forfeiture fund advisory board under	529
section 1513.182 of the Revised Code, an additional fourteen cents	530
per ton of coal produced from an area under a coal mining and	531
reclamation permit issued under Chapter 1513. of the Revised Code	532
for which the performance security is provided under division	533
(C)(2) of section 1513.08 of the Revised Code. Beginning July 1,	534
2007, if at the end of a fiscal biennium the balance of the	535
reclamation forfeiture fund created in section 1513.18 of the	536
Revised Code is equal to or greater than ten million dollars, the	537
rate levied shall be twelve cents per ton. Beginning July 1, 2007,	538
if at the end of a fiscal biennium the balance of the fund is at	539
least five million dollars, but less than ten million dollars, the	540
rate levied shall be fourteen cents per ton. Beginning July 1,	541
2007, if at the end of a fiscal biennium the balance of the fund	542
is less than five million dollars, the rate levied shall be	543
sixteen cents per ton. Beginning July 1, 2009, not later than	544
thirty days after the close of a fiscal biennium, the chief of the	545
division of mineral resources management shall certify to the tax	546
commissioner the amount of the balance of the reclamation	547
forfeiture fund as of the close of the fiscal biennium. Any	548
necessary adjustment of the rate levied shall take effect on the	549
first day of the following January and shall remain in effect	550
during the calendar biennium that begins on that date.	551

(9) An additional one and two-tenths cents per ton of coal	552
mined by surface mining methods;	553

(10) Seven and one-half per cent of the product of the	554
metered quarterly volume of oil or condensate severed through use	555
of a horizontal well multiplied by the average of the daily	556
closing spot price for the quarterly reporting period for oil or	557
condensate as established by the tax commissioner under division	558
(D)(2) of this section;	559

(11)(a) If the British thermal unit measurement of gas	560
severed through use of a horizontal well is equal to or less than	561
one thousand fifty per cubic foot, seven and one-half per cent of	562
the product of the metered quarterly volume of gas severed through	563
use of the horizontal well multiplied by the quarterly average of	564
the daily closing spot price of gas for the quarterly reporting	565
period as established by the tax commissioner under division	566
(D)(1) of this section;	567

(b) If the British thermal unit measurement of gas severed	568
through use of a horizontal well is greater than one thousand	569
fifty per cubic foot but less than or equal to one thousand two	570
hundred per cubic foot, the rate established by the tax	571
commissioner under division (E)(1) of this section multiplied by	572
the metered quarterly volume of gas severed through use of the	573
horizontal well;	574

(c) If the British thermal unit measurement of gas severed	575
through use of a horizontal well is greater than one thousand two	576
hundred per cubic foot but less than or equal to one thousand	577
three hundred fifty per cubic foot, the rate established by the	578
tax commissioner under division (E)(2) of this section multiplied	579
by the metered quarterly volume of gas severed through use of the	580
horizontal well;	581

(d) If the British thermal unit measurement of gas severed	582
through use of a horizontal well is greater than one thousand	583
three hundred fifty per cubic foot, the rate established by the	584
tax commissioner under division (E)(3) of this section multiplied	585
by the metered quarterly volume of gas severed through use of the	586
horizontal well.	587

(B) Of the moneys received by the treasurer of state from the	588
tax levied in division (A)(1) of this section, four and	589
seventy-six-hundredths per cent shall be credited to the	590
geological mapping fund created in section 1505.09 of the Revised	591
Code, eighty and ninety-five-hundredths per cent shall be credited	592
to the coal mining administration and reclamation reserve fund	593
created in section 1513.181 of the Revised Code, and fourteen and	594
twenty-nine-hundredths per cent shall be credited to the	595
unreclaimed lands fund created in section 1513.30 of the Revised	596
Code.	597

The money received by the treasurer of state from the tax	598
levied in division (A)(2) of this section shall be credited to the	599
geological mapping fund.	600

Of the moneys received by the treasurer of state from the tax	601
levied in divisions (A)(3) and (4) of this section, seven and	602
five-tenths per cent shall be credited to the geological mapping	603
fund, forty-two and five-tenths per cent shall be credited to the	604
unreclaimed lands fund, and the remainder shall be credited to the	605
surface mining fund created in section 1514.06 of the Revised	606
Code.	607

Of the moneys received by the treasurer of state from the tax	608
levied in divisions (A)(5) and (6) of this section, ninety per	609
cent shall be credited to the oil and gas well fund created in	610
section 1509.02 of the Revised Code and ten per cent shall be	611
credited to the geological mapping fund. All of the moneys	612
received by the treasurer of state from the tax levied in division	613
(A)(7) of this section shall be credited to the surface mining	614
fund.	615

All of the moneys received by the treasurer of state from the	616
tax levied in division (A)(8) of this section shall be credited to	617
the reclamation forfeiture fund.	618

All of the moneys received by the treasurer of state from the	619
tax levied in division (A)(9) of this section shall be credited to	620
the unreclaimed lands fund.	621

The money received by the treasurer of state from the tax	622
levied in divisions (A)(10) and (11) of this shall be credited as	623
follows:	624

(1) Forty-seven per cent to the impacted subdivision fund	625
created in section 5749.18 of the Revised Code;	626

(2) Twenty per cent to the nonimpacted subdivision fund	627
created in section 5749.18 of the Revised Code;	628

(3) Eleven and seven-tenths per cent to the severance tax	629
trust fund created in section 190.01 of the Revised Code;	630

(4) Nine per cent to the immediate removal fund created in	631
section 3745.12 of the Revised Code;	632

(5) Seven per cent to the well inspection fund created in	633
section 1509.074 of the Revised Code;	634

(6) Four per cent to the oil and gas well fund created in	635
section 1509.02 of the Revised Code;	636

(7) One and three-tenths per cent to the severance tax trust	637
administrative fund created in section 190.02 of the Revised Code.	638

(C) When, at the close of any fiscal year, the chief finds	639
that the balance of the reclamation forfeiture fund, plus	640
estimated transfers to it from the coal mining administration and	641
reclamation reserve fund under section 1513.181 of the Revised	642
Code, plus the estimated revenues from the tax levied by division	643
(A)(8) of this section for the remainder of the calendar year that	644
includes the close of the fiscal year, are sufficient to complete	645
the reclamation of all lands for which the performance security	646
has been provided under division (C)(2) of section 1513.08 of the	647
Revised Code, the purposes for which the tax under division (A)(8)	648
of this section is levied shall be deemed accomplished at the end	649
of that calendar year. The chief, within thirty days after the	650
close of the fiscal year, shall certify those findings to the tax	651
commissioner, and the tax levied under division (A)(8) of this	652
section shall cease to be imposed for the subsequent calendar year	653
after the last day of that calendar year on coal produced under a	654
coal mining and reclamation permit issued under Chapter 1513. of	655
the Revised Code if the permittee has made tax payments under	656
division (A)(8) of this section during each of the preceding five	657
full calendar years. Not later than thirty days after the close of	658
a fiscal year, the chief shall certify to the tax commissioner the	659
identity of any permittees who accordingly no longer are required	660
to pay the tax levied under division (A)(8) of this section for	661
the subsequent calendar year.	662

(D) Not later than fifteen days after the close of each	663
calendar quarter, the tax commissioner shall establish and post on	664
the department of taxation's web site the average daily closing	665
spot price or factor, as applicable, for each quarterly reporting	666
period as follows:	667

(1) For the purposes of division (A)(11) of this section, the	668
average daily closing spot price for gas shall be calculated by	669
dividing the sum of the daily closing spot price for gas as	670
reported on the New York mercantile exchange index for each day in	671
the quarter by the number of days in the quarter.	672

(2) For the purposes of division (A)(10) of this section, the	673
average daily closing spot price for oil and condensate shall be	674
calculated by dividing the sum of the daily closing spot price for	675
oil and condensate as reported for west Texas intermediate on the	676
New York mercantile exchange index for each day in the quarter by	677
the number of days in the quarter.	678

(3) For the purposes of division (E) of this section, the	679
average daily closing spot price for natural gas liquids shall be	680
calculated by dividing the sum of the daily closing spot prices	681
for natural gas liquids as reported on the Mont Belvieu NGL index	682
for each day in the quarter by the number of days in the quarter.	683

(E) Not later than fifteen days after the close of each	684
calendar quarter, the tax commissioner shall calculate and post on	685
the department of taxation's web site the rate of the tax levied	686
under divisions (A)(11)(b) to (d) of this section, which the	687
commissioner shall calculate for each quarterly reporting period	688
as follows:	689

(1) For the purposes of division (A)(11)(b) of this section,	690
the sum of the average daily closing spot price for gas	691
established under division (D)(1) of this section multiplied by	692
seven and one-half per cent multiplied by nine thousand three	693
hundred twenty-nine ten-thousandths, plus the average daily	694
closing spot price for natural gas liquids established under	695
division (D)(3) of this section multiplied by seven and one-half	696
per cent multiplied by two and one-half;	697

(2) For the purposes of division (A)(11)(c) of this section,	698
the sum of the average daily closing spot price for gas	699
established under division (D)(1) of this section multiplied by	700
seven and one-half per cent multiplied by eight thousand two	701
hundred thirty-two ten-thousandths, plus the average daily closing	702
spot price for natural gas liquids established under division	703
(D)(3) of this section multiplied by seven and one-half per cent	704
multiplied by five and one-half;	705

(3) For the purposes of division (A)(11)(d) of this section,	706
the sum of the average daily closing spot price for gas	707
established under division (D)(1) of this section multiplied by	708
seven and one-half per cent multiplied by seven thousand three	709
hundred sixty-six ten-thousandths, plus the average daily closing	710
spot price for natural gas liquids established under division	711
(D)(3) of this section multiplied by seven and one-half per cent	712
multiplied by eight and one-half.	713

Sec. 5749.18. (A) As used in this section:

714

(1) "Impacted subdivision" means a county, township, or	715
municipal corporation located in an area of this state that is or	716
will be a major producer of oil and gas from horizontal wells, as	717
designated and certified by the chief of the division of oil and	718
gas resources management in the department of natural resources	719
pursuant to division (B) of this section.	720

(2) "Nonimpacted subdivision" means a county, township, or	721
municipal corporation that is not an impacted subdivision.	722

(3) "Current operating expenses" and "permanent improvement"	723
have the same meanings as in section 5705.01 of the Revised Code.	724

(B) On or after the thirty-first day of July of each year,	725
the chief of the division of oil and gas resources management in	726
the department of natural resources shall determine each county,	727
township, or municipal corporation that is an impacted subdivision	728
and certify that determination to the tax commissioner.	729

(C)(1) There is hereby created in the state treasury the	730
impacted subdivision fund. Forty-seven per cent of the moneys from	731
the tax levied in divisions (A)(10) and (11) of section 5749.02 of	732
the Revised Code shall be credited to the fund. Investment	733
earnings on the balance in the fund shall be credited to the fund.	734
The tax commissioner shall distribute money in the fund to	735
impacted subdivisions pursuant to division (C)(2) of this section.	736

(2) The tax commissioner, on or before the thirty-first day	737
of August of each year, shall distribute moneys in the impacted	738
subdivision fund to the severance tax fund of each impacted	739
subdivision. The payment to each impacted county or municipal	740
corporation shall be allocated based on the following factors:	741

(a) The proportion of employees who are employed in oil, gas,	742
or condensate production operations and who reside in any such	743
county's unincorporated territory or in the part of the territory	744
of any such municipal corporations situated within the county to	745
the total number of such employees reported as residents in the	746
county as a whole;	747

(b) The proportion of the population in any such county's	748
unincorporated territory or in the part of the territory of any	749
such municipal corporation situated within the county to the total	750
population in the county, as such population is reported in the	751
most recently published population estimate from the development	752
services agency;	753

(c) The proportion of centerline road miles in any such	754
county's unincorporated territory or in the part of the territory	755
of any such municipal corporation situated within the county to	756
the total centerline road miles in the county, as determined	757
annually by the department of transportation.	758

(3) The tax commissioner shall credit one-half of the	759
county's allocation calculated under division (C)(2) of this	760
section to the severance tax fund of the impacted county. The	761
commissioner shall credit the remaining one-half of the county's	762
allocation to the severance tax fund of each impacted township in	763
the county based on the proportions in divisions (C)(2)(a) to (c)	764
of this section, except that the employment, population, and	765
centerline road miles factors for the unincorporated territory of	766
each impacted township shall be compared to those for the	767
unincorporated area of the county as a whole.	768

(D)(1) There is hereby created in the state treasury the	769
nonimpacted subdivision fund. Twenty per cent of the moneys from	770
the tax levied in divisions (A)(10) and (11) of section 5749.02 of	771
the Revised Code shall be credited to the fund. Investment	772
earnings on the balance in the fund shall be credited to the fund.	773
The tax commissioner shall distribute moneys in the fund to	774
nonimpacted subdivisions pursuant to division (D)(2) of this	775
section.	776

(2) The tax commissioner, on or before the thirty-first day	777
of August of each year, shall distribute moneys in the nonimpacted	778
subdivision fund to the severance tax fund of each nonimpacted	779
subdivision. The payment to each nonimpacted county or municipal	780
corporation shall be allocated based on the following factors:	781

(a) The proportion of employees who are employed in oil, gas,	782
or condensate production operations and who reside in any such	783
county's unincorporated territory or in the part of the territory	784
of any such municipal corporation situated within the county to	785
the total number of such employees reported as residents in the	786
county as a whole;	787

(b) The proportion of the population in any such county's	788
unincorporated territory or in the part of the territory of any	789
such municipal corporation situated within the county to the total	790
population in the county, as such population is reported in the	791
most recently published population estimate from the development	792
services agency;	793

(c) The proportion of centerline road miles in any such	794
county's unincorporated territory or in the part of the territory	795
of any such municipal corporation situated within the county to	796
the total centerline road miles in the county, as determined	797
annually by the department of transportation.	798

(3) The tax commissioner shall credit one-half of the	799
county's allocation calculated under division (D)(2) of this	800
section to the severance tax fund of the nonimpacted county. The	801
commissioner shall credit the remaining one-half of the county's	802
allocation to the severance tax fund of each nonimpacted township	803
in the county based on the proportions in divisions (D)(2)(a) to	804
(c) of this section, except that the employment, population, and	805
centerline road miles factors for the unincorporated territory of	806
each nonimpacted township shall be compared to those for the	807
unincorporated territory of the county as a whole.	808

(E) Impacted and nonimpacted subdivisions shall use revenue	809
received under this section solely for permanent improvements and	810
current operating expenses.	811

(F) Not later than the first day of March each year, the	812
commissioner shall send every severer who is subject to the tax	813
levied under division (A)(5), (6), (10), or (11) of section	814
5749.02 of the Revised Code a form on which the producer shall	815
report to the department of taxation the name and address of the	816
severer and the names of the counties and the municipal	817
corporations or townships in which the severer's employees	818
employed in production operations maintain their actual residences	819
as given by the employees, including the number of employees for	820
each such municipal corporation or unincorporated area of each	821
such county and township.	822

A severer may use and submit any other report form in lieu of	823
the form sent by the commissioner that contains the same	824
information as prescribed in the commissioner's form. The report	825
shall be due by the thirtieth day of April of each year.	826

(G) On or before August 30, 2014, each county, township, and	827
municipal corporation shall create a severance tax fund in each	828
respective subdivision's treasury to which the tax commissioner	829
shall credit revenue distributed under this section.	830

(H) The commissioner shall adopt rules in accordance with	831
Chapter 119. of the Revised Code to administer the distribution of	832
the impacted subdivision fund and the nonimpacted subdivision	833
fund, including the weight that each of the factors in divisions	834
(C)(2)(a) to (c) and (D)(2)(a) to (c) of this section shall be	835
given, which shall apply uniformly across impacted subdivisions	836
and uniformly across nonimpacted subdivisions.	837

Section 2. That existing sections 1509.02, 1509.071,	838
5749.01, and 5749.02 of the Revised Code are hereby repealed.	839

Section 3. The amendment or enactment by this act of sections	840
190.01, 190.02, 190.03, 109.04, 190.05, 1509.02, 1509.071,	841
1509.074, 5749.01, 5749.02, and 5749.18 of the Revised Code	842
applies to the severance of natural resources occurring in	843
calendar quarters beginning on or after October 1, 2013.	844

Section 4. The amendment or enactment by this act of sections	845
190.01, 190.02, 190.03, 109.04, 190.05, 1509.02, 1509.071,	846
1509.074, 5749.01, 5749.02, and 5749.18 of the Revised Code below	847
is exempt from the referendum under Ohio Constitution, Article II,	848
Section 1d and section 1.471 of the Revised Code and therefore	849
takes effect immediately when this act becomes law.	850

Section 5. Section 5749.02 of the Revised Code is presented	851
in this act as a composite of the section as amended by both Am.	852
Sub. H.B. 1 and S.B. 73 of the 128th General Assembly. The General	853
Assembly, applying the principle stated in division (B) of section	854
1.52 of the Revised Code that amendments are to be harmonized if	855
reasonably capable of simultaneous operation, finds that the	856
composite is the resulting version of the section in effect prior	857
to the effective date of the section as presented in this act.	858