WV Legislators Fast Track Fix of Severance Tax Exemption Loophole

WV Senate Bill 638, introduced on Monday, appears to be on a fast track through the state Senate. The bill would repeal severance tax exemptions for some natural gas wells. In 2000, legislators enacted severance tax exemptions to encourage older natural gas wells that were not producing to re-open. Many of the operators of those wells are mom and pop, small-time operators—so legislators passed a law that said in essence, “If a well has been dormant more than five years, re-open it and we’ll suspend severance taxes on its production for the next 10 years.”

Legislators are now concerned that huge energy companies drilling for shale gas may decide to shut-in a well for five years to let prices rise and then re-open it and get 10 years of tax-free production. Hence Senate Bill 638, to repeal the older legislation and fix the loophole. The balancing act is to not throw the baby out (production from small-time vertical wells) with the bathwater (big-time horizontal shale wells)…

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