Responses
June 30, 1993 and September 2, 1993
Request
April
13, 1993
XXXXX
Dear
XXXXX:
Thank
you for taking time to meet with me today on behalf of my client to discuss oil
severance taxes. My client is exploring the feasibility of new technologies
applicable to the clean-up of waste oil pits and evaporation ponds in the oil
producing areas of Utah. As you know the Utah State Department of Oil & Gas
has mandated the clean up of all unlined pits and ponds. My clients interest is
determining the impact of any severance tax which may be applicable to any
salable crude oils which may be recovered by the new high technology process
they have developed. In their analysis of the economics of their systems, it is
important to include the impact of any taxes and or permits which may be
required for their pilot operations being planned for the very near future in
the XXXXX County area.
As
we discussed in our meeting today your review of the pertinent tax statutes
indicates that there would be no tax applicable to the proposed operations, as
they have been outlined to you. I would appreciate your written confirmation
and verification that there would be no taxes applicable to the recovered oils
derived from the clean up of existing waste oil pits.
Thank
you and XXXXX again for your interest in our project and the time you have
given me today. I will keep you informed of our progress, and advise you if
there is any additional information we need, or any changes in the operations
proposed from those discussed today.
Sincerely
yours,
XXXXX
Enclosure:
April 13 Letter
Mr.
R. H. Hansen - Chairman
Utah
State Tax Commission
Heber
Wells Building
160
East Third South
Salt Lake City, Utah 84134
Dear
Mr. Hansen:
I
met with XXXXX and XXXXX on XXXXX to discuss potential impacts of severance
taxes. The meeting was on behalf of my client, XXXXX who is evaluating new
technologies for clean up of waste oil pits and evaporation ponds in the oil
producing areas of Utah. The intent of our meeting was to determine if
severance taxes would apply to salable crude which may be recovered by the
process they have developed. I have enclosed a copy of my letter of XXXXX to
XXXXX requesting written verification of his auditory opinion expressed in that
meeting that there would be no severance tax applicable to the crude recovered
in the proposed operation. XXXXX has advised me that such a letter can only
come from the Commission upon their review of the specific proposed operation.
I
will attempt therefore to provide a brief summary of the operation proposed,
for your information. XXXXX has developed a new high tech method of cleaning up
waste oil pits and ponds. This process removes all noxious or hazardous waste
materials from the oils, and recovers some clean crude oils, and water which
may be returned to the surface waters for use in agriculture and or aquatic
wildlife habitat such as streams or lakes. The well owner/operators paid
severance taxes when the oil was produced and sold. The waste oils were
generated as part of the process of removing the water from the crude sold to
meet refinery specifications.
As
noted in my letter to XXXXX and in our discussion, the clean up of these pits
and ponds has been mandated by the department of XXXXX. The system used by
XXXXX is proprietary with patents pending, and is successful in the required
clean up of these waste oil pits to meet or exceed all Federal and State
standards.
Thank
you for the opportunity to provide this information for your review. Due to the
short summer during which these operations can be conducted and the very high
cost of building and siting this equipment on location. We sincerely appreciate the earliest
response possible.
I
will be happy to meet with you and/or such members of your staff as is
appropriate to provide any additional information necessary.
Sincerely
yours,
XXXXX
cc: XXXXX
XXXXX
Re:
Advisory Opinion -- Oil and Gas Severance Tax Applicability to Crude Oil from
Waste Oil Pits and Evaporation Ponds
Dear
XXXXX:
Your
request (XXXXX letter, copy attached) for an advisory opinion asking whether
severance taxes are due on crude oil obtained from the clean-up of waste oil
pits and evaporation ponds was referred to the Auditing Division for their
analysis.
For
further clarification, on XXXXX, XXXXX, Supervisor of XXXXX, and XXXXX,
Auditor, met with you to discuss this question. During this conversation, it
was determined that the company removing (cleaning up) the wastes from these
pits is not the operator and/or interest owner. Additionally, the company would
not pay the operator and/or interest owner for the removal of the wastes. The
company cleaning up these wastes (XXXXX), would either be given the waste
products from the pits and the ponds or receive a nominal payment for removal
of the wastes.
The
divisions' staff recommendations are as follows:
1. Utah Code Annotated Section 59-5-102 states
that every person owning an interest, working interest, royalty interest,
payments out of production, or any other interest, in oil or gas produced from
a well in the state shall pay severance tax. The auditing division has
concluded that no severance tax would be due on any of the salvable crude oil
from these waste pits and evaporation ponds for the following reasons:
a. XXXXX is not an operator or interest owner
in the wells which would included the waste pits and evaporation ponds.
b. The operator/interest owner would either
give the waste products from the pits and ponds to XXXXX or pay them a nominal
amount to remove these wastes.
Based
upon the facts presented in your letter and the meeting with the auditing
division, we are in agreement with the Auditing Division's recommendations.
Obviously, if there are deviations form these facts, this opinion may be
negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The result of that hearing would constitute a declaratory
judgment and be appealable to the Utah State Supreme Court. A notice of Appeal
Rights and a copy of the Utah Taxpayer Bill of rights are attached.
In
contacting the Tax Commission, if special accommodations are needed in
accordance with the Americans with Disabilities Act, please call (801)
530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing three working days
notice.
For
the Commission,
Joe.
B Pacheco
Commissioner
XXXXX
Re:
Advisory Opinion - Oil and Gas Severance Tax Applicability to Crude Oil from
Waste Oil Pits and Evaporation Ponds
Dear
XXXXX:
Your
request for an advisory opinion asking whether severance taxes are due on crude
oil obtained from the clean-up of waste oil pits and evaporation ponds was
referred to the Auditing Division for their analysis.
The
divisions' staff recommendation is as follows:
No
severance tax would be due on any of the waste crude oil from these waste pits
and evaporation ponds because XXXXX is not an operator or interest owner in any
of the wells that the waste oil came from. The waste oil was originally removed
from the production stream as waste and not a salable product.
Based
upon the facts presented in your letter and the meeting with the Auditing
Division, we are in agreement with the Auditing Division's recommendations.
Obviously, if there are deviations form these facts, this opinion may be
negated.
For
the Commission,
Alice
Shearer
Commissioner