American Oil and Gas Reporter - April 2020 - 35

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plants, a 10-year credit against corporate
or personal income taxes ranging from
10% to 20%, depending on the number
of jobs created.
HB 4421 provides ad valorem tax
credits to companies that transport or
store natural gas liquids, which Burd says
"sets the tone for future development of
a storage hub."
Left Undone
On the more disappointing side of IOGAWV's 2020 state legislative ledger,
Ellis and Burd agree, is the failure of SB
655 to gain approval.
SB 655 addressed how producing
properties are valued for ad valorem tax
purposes, Ellis says, and grew out of the
West Virginia Supreme Court's June 2019
ruling in Steager v. Consol Energy Inc.,
which found the state Tax Department's
average annual well operating expense
calculation likely was unconstitutional.
He explains that the fair market value
of producing properties in West Virginia
is to be determined through a yield capitalization model that subtracts royalties
and operating expenses from gross receipts.
But, he contends, "The state arbitrarily
capped expenses at a level that didn't reflect reality."
SB 655, Ellis says, would have required
the Tax Department within three years to
calculate, and then maintain, net proceeds
for various types of wells and lateral
lengths that more closely reflected average
operating expenses, including lifting costs,
gathering, compression, processing and
transportation charges. The bill also provided for keeping confidential the operating expense information provided by
operators, and instituted an alternate appeals process.
After passing the Senate, SB 655 died
in the House Finance Committee, Burd
reports.
"It is a complicated issue," Ellis allows.
"It is going to require more education.
We are going to have to find a way to explain why there is a benefit to doing this
correctly and why the counties may not
necessarily be impacted negatively."
Another legislative initiative by the
West Virginia Manufacturers Association
that IOGAWV supported but did not actively pursue, Burd mentions, was SJR 9
and SB 837, which would have eliminated
the state's business and inventory tax.
SJR 9 was a joint resolution to place a
constitutional question before West Virginia voters, while SB 837 provided for
phasing out over six years the property
tax on machinery, equipment and inventory, and increasing other taxes to cover
the revenue shortfall, he says. However,
the effort ground to a halt when SJR 9

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American Oil and Gas Reporter - April 2020

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