It is critical that Landowners understand potential “Clean and Green” tax implications when considering ANY Contract with a Natural Gas OR Pipeline Company.

 

Clean and Green is another complicated area of Pennsylvania law that is often misunderstood by Landowners, Landmen, and even attorneys. Landowners absolutely cannot rely on representations or statements made by company Landman as to whether their Oil and Gas Lease, Pipeline Right-of-Way Agreement, Roadway Agreement or other gas development contract will result in negative Clean and Green tax consequences. Far too often the gas and pipeline company Landman does not accurately discuss and explain potential Clean and Green tax consequences when asking the Landowner to sign an Agreement. A landowner must fully understand potential Clean and Green tax consequences before signing any natural gas Agreement.

Unfortunately Landowners are routinely signing Agreements with gas and pipeline companies while not realizing that these Agreements will or may have significant future negative tax consequences. An experienced Oil and Gas attorney will seek complete Clean and Green tax protection for the Landowner and explain the potential impact that any natural gas related contract will have on the Landowner’s Clean and Green status.

Remember, NOT ALL CLEAN AND GREEN PROVISIONS ARE CREATED EQUAL! Do not be fooled into believing you have complete Clean and Green protection simply because your Oil and Gas Lease, Pipeline Right-of-Way Agreement, or Roadway Agreement contains an Addendum term entitled “Clean and Green.” Many Landowners are very surprised to learn that the Clean and Green provision in their Oil and Gas Lease or other Agreement is insufficient and fails to insulate them from “any and all” past Clean and Green taxes and penalties, and future tax increases.

Clean and Green Addendum language must be carefully negotiated and crafted to provide the most complete protection for the Landowner. A skilled Oil and Gas lawyer will draft Addendum language to provide the Landowner the best available Clean and Green protection. If you are presented with ANY offer from a gas or pipeline company, contact The Clark Law Firm, PC today. Attorney Doug Clark is Pennsylvania’s Landowner Lawyer and understands Pennsylvania’s Clean and Green statute.

BONUS: General Explanation of Pennsylvania Clean and Green Statute

The Pennsylvania Farmland and Forest Land Assessment Act of 1974, more commonly known as “Clean and Green,” is a preferential tax assessment statute that affects the rights of some Pennsylvania Landowners. Clean and Green is a Pennsylvania state law that allows qualifying land that is devoted to agricultural and forest land use to be assessed at a value for that use rather than the fair market value. In other words, Clean and Green is a land conservation program that reduces the property tax rate for the landowners who enroll in the program. The intent of Clean and Green is to encourage property owners to retain their land in agricultural, open space, or forest land use, by providing real estate tax relief. Thus, if a Landowner enrolls in the program, the Landowner is then obligated to devote their land to agricultural use, agricultural reserve use, or forest reserve use in order to qualify for reduced property taxes.

Landowners who wish to enroll into the Clean and Green program must submit an application to their county assessment office. Once a Landowner is enrolled, the general rule is that the Landowner is obligated to continue using the land in a qualified use indefinitely or face “roll-back” taxes for the most recent seven (7) years, plus interest. The “roll-back” tax is the difference between the real estate taxes the owner would have paid if the property was assessed under the Fair Market Value valuation system and the reduced taxes the owner paid under the Clean and Green Use Value assessment. However, many Pennsylvania counties are now assessing certain gas related activities at a commercial tax rate which now ranges between $1,000 and $1,500 per acre and is generally much higher than the Fair Market Value valuation system. Land that has been enrolled in Clean and Green for more than seven (7) years is only subject to roll-back taxes for the seven (7) most recent tax years, and land that has been in Clean and Green for less than seven (7) years is subject to roll-back taxes only for the years it has been in the program. In addition to the roll-back tax, interest is imposed on each year’s roll-back tax at the rate of six percent (6%) per year.

Note: The foregoing is only a basic outline of only a portion of Pennsylvania’s Clean and Green law.

The Clark Law Firm, PC fights to construct ALL Agreements with gas and pipeline companies to eliminate or reduce any negative Clean and Green tax consequence. If you are considering ANY natural gas or pipeline related contract and your property is enrolled in the Clean and green Program, contact us today.

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