Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 12-0315.01 Ed DeCecco x4216 HOUSE BILL 12-1167 HOUSE SPONSORSHIP Fischer, SENATE SPONSORSHIP (None), House Committees Senate Committees Agriculture, Livestock, & Natural Resources A BILL FOR AN ACT Concerning special fuel. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill modifies the regulation of the fuel products by the division of oil and public safety (division) in the department of labor and employment as follows: Section 1 of the bill broadens the duties of the director of the division (director) to include the regulation of fuel products other than liquids. Section 2 includes "natural gas" in the definition of "fuel products". Section 3 specifies that natural gas is subject to inspection. Section 4 requires liquefied natural gas and compressed natural gas to comply with certain national standards. Section 5 requires a person who ships natural gas into the state to notify the director. Section 6 requires natural gas to be subject to the same environmental response surcharge as liquefied petroleum gas and modifies how the surcharge is levied on liquefied petroleum gas. Section 6 also permits the fees to be used for inspections related to natural gas. Sections 7, 8, 10, 11, 12, and 13 make conforming amendments related to the fact that natural gas is not a liquid measured in gallons. Section 9 establishes labeling standards for natural gas. The bill also modifies the collection of the tax on special fuel as follows: Section 14 modifies the definition of "special fuel" to include "electricity". As a result, "electricity" used to propel a motor vehicle on a highway will be subject to the tax on special fuel. Section 14 also modifies the definition of "distributor" to include certain persons who sell or use natural gas and electricity, but exclude a person who sells to a home user. Section 15 repeals the annual license tax fee that is charged in lieu of the special fuel tax and the related decal system, so that liquefied petroleum gas and natural gas will be subject to the special fuel tax. Section 16 makes a conforming amendment to accommodate the elimination of the decal system. Section 17 requires a person who is not a licensed distributor to pay the special fuel tax, based on a metered reading, and file a return related to liquefied petroleum gas, natural gas, or electricity if such tax has not been paid by a distributor. This requirement will apply to a person who receives the special fuel in his or her home. Section 17 also requires the division to establish minium standards for the meters. Section 18 clarifies how a person who pays sales tax on special fuel that is subject to the special fuel tax may apply for a refund. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 8-20-102, amend (1) as follows: 8-20-102. Duties of director of division of oil and public safety. (1) The director of the division of oil and public safety shall make, promulgate, and enforce rules setting forth minimum and general standards covering the design, construction, location, installation, and operation of equipment for storing, handling, and utilizing liquid fuel products. Said rules shall be such as are reasonably necessary for the protection of the health, welfare, and safety of the public and persons using such materials, and shall be in substantial conformity with the generally accepted standards of safety concerning the same subject matter. Such rules shall be adopted by the director of the division of oil and public safety in compliance with section 24-4-103, C.R.S. SECTION 2. In Colorado Revised Statutes, 8-20-201, amend (2) as follows: 8-20-201. Definitions. As used in this part 2, unless the context otherwise requires: (2) "Fuel products" means all gasoline, aviation gasoline, aviation turbine fuel, diesel, jet fuel, fuel oil, biodiesel, biodiesel blends, kerosene, all alcohol blended fuels, liquified liquefied petroleum gas, gas or gaseous compounds, natural gas, including compressed natural gas and liquefied natural gas, and all other volatile, flammable, or combustible liquids, produced, compounded, and offered for sale or used for the purpose of generating heat, light, or power in internal combustion engines or fuel cells, for cleaning, or for any other similar usage. SECTION 3. In Colorado Revised Statutes, 8-20-203, add (2.5) as follows: 8-20-203. Inspection. (2.5) Fuel products that are natural gas are subject to inspection. SECTION 4. In Colorado Revised Statutes, 8-20-204, amend (1) as follows: 8-20-204. Specifications - classes I, II, and III - natural gas. (1) All products in classes I, II, and III shall comply with the most current applicable specifications of ASTM, which are found in section 5 of that organization's publication "Petroleum Products, Lubricants, and Fossil Fuels" and supplements thereto or revisions thereof as may be designated by ASTM, except as modified or rejected by this article or any rule promulgated pursuant to this article. If gasoline is blended with ethanol, the ASTM D 4814 specifications shall apply to the base gasoline prior to blending. Blends of gasoline and ethanol shall not exceed the ASTM D 4814 vapor pressure standard; except that, if the ethanol is blended at nine percent or higher but not exceeding ten percent, the blend may exceed the ASTM D 4814 vapor pressure standard by no more than 1.0 PSI. Class I products shall not be blended at a retail location with products commonly and commercially known as casinghead gasoline, absorption gasoline, condensation gasoline, drip gasoline, or natural gasoline. Liquefied natural gas shall comply with the most current applicable specifications of ASTM. Compressed natural gas shall meet the SAE J1616 stationary sound test or any successor test published by SAE international or any successor organization. SECTION 5. In Colorado Revised Statutes, amend 8-20-206 as follows: 8-20-206. Shipper notify director. (1) Any person who ships fuel products included in classes I and II or natural gas into the state, or who ships such fuel products from any refinery or pipeline terminal within the state to another point within the state, shall notify the director of the division of oil and public safety of the shipment within twenty-four hours after the shipment has been billed for departure in the case of tank cars, or after the shipment has been loaded for departure in the case of barrels, trucks, or tank wagons. At the same time, such person shall forward to the director of the division of oil and public safety a true sample of the contents of the shipment weighing at least eight ounces, with the specifications thereof and the number and initial of the tank car, or if some other method of transportation is used, an adequate description of the means of conveyance or container, so as to enable identification of the shipment. Any person who diverts a shipment of such fuel products into the state of Colorado from outside the state shall give the same notice and forward the same type of sample to the director of the division of oil and public safety within twenty-four hours after the billing of the shipment is changed to a Colorado destination. (2) If more than one car of fuel products included in classes I and II or natural gas is shipped at the same time from the same source and refinery run, the director of the division of oil and public safety may accept one sample for all or any part of such shipment. (3) Notwithstanding any provision of this section to the contrary, the director of the division of oil and public safety may establish a different sample size for natural gas. SECTION 6. In Colorado Revised Statutes, 8-20-206.5, amend (1) (a), (1) (d), (1) (e), (3), and (4) (b) as follows: 8-20-206.5. Environmental response surcharge - liquefied petroleum gas and natural gas inspection fund - definitions. (1) (a) Every first purchaser of odorized liquefied petroleum gas, every manufacturer of fuel products who manufactures such products for sale within Colorado or who ships such products from any point outside of Colorado to a distributor within Colorado, and every distributor who ships such products from any point outside of Colorado to a point within Colorado shall pay to the executive director of the department of revenue, each calendar month, either twenty-five dollars per tank truckload of fuel products delivered during the previous calendar month for sale or use in Colorado or the fee for odorized liquefied petroleum gas and natural gas as specified in paragraph (d) of this subsection (1), whichever is applicable. Such payment shall be made on forms prescribed and furnished by the executive director. The provisions of this section shall not apply to fuel that is especially prepared and sold for use in aircraft or railroad equipment or locomotives. (d) Notwithstanding paragraph (b) of this subsection (1), the executive director of the department of revenue shall have the authority to determine and adjust a fee for odorized liquefied petroleum gas and natural gas, not to exceed ten dollars per tank truckload one thousand gallons or the gallon gasoline equivalent. (e) (I) There is hereby created the liquefied petroleum gas and natural gas inspection fund within the state treasury. Neither this section nor section 8-20.5-103 shall be construed to make the liquefied petroleum gas and natural gas inspection fund an enterprise fund. Such fund shall consist of: (A) Liquefied petroleum gas and natural gas inspection moneys collected pursuant to this article; (B) Civil penalties collected as a result of court actions pursuant to section 8-20-104; (C) Any moneys appropriated to the fund by the general assembly; and (D) Any moneys granted to the department from a federal agency or trade association for administration of the department's liquefied petroleum gas and natural gas inspection program. (II) The executive director of the department of revenue shall adjust the fees collected pursuant to this article so that the balance of unexpended and unencumbered moneys in the liquefied petroleum gas and natural gas inspection fund does not exceed the amount necessary to accumulate and maintain in the liquefied petroleum gas and natural gas inspection fund a reserve sufficient to defray administrative expenses of the division of oil and public safety for a period of two months. (III) The moneys in the fund shall be subject to annual appropriation by the general assembly. Moneys in the fund shall only be used for costs related to: (A) Initial and subsequent inspections of liquefied petroleum gas and natural gas installations; (B) Proving, including calibrating and adjusting, liquefied petroleum gas and natural gas meters and dispensers; (C) Abatement of fire and safety hazards at liquefied petroleum gas and natural gas installations; (D) Investigation of reported liquefied petroleum gas and natural gas that requires state matching dollars; (E) Any federal program pertaining to liquefied petroleum gas and natural gas that requires state matching dollars; (F) Liquefied petroleum gas and natural gas product quality testing; (G) Administrative costs, including costs for contract services; and (H) Defraying the salaries and operating expenses incurred by the department of labor and employment in the administration of this article as it pertains to liquefied petroleum gas and natural gas installations, meters, and dispensers. Such moneys shall be appropriated for such purposes by the general assembly. (IV) The moneys in the liquefied petroleum gas and natural gas inspection fund and all interest earned on the moneys in the fund shall remain in such fund and shall not be credited or transferred to the general fund or any other fund at the end of any fiscal year. (3) It is the duty of every manufacturer or distributor as described in subsection (1) of this section to compute the amount of the surcharge payable on all tank truckloads, gallons, or gallon gasoline equivalents sold by him the manufacturer or distributor and separately state the surcharge due on statements issued with each purchase of fuel. In the event that the manufacturer or distributor sells such fuel to a retailer or consumer or consumes such fuel, he the manufacturer or distributor shall pay to the department of revenue the surcharge imposed in subsection (1) of this section. (4) For the purposes of this section: (b) "Fuel product" means gasoline, blended gasoline, gasoline sold for gasohol production, gasohol, diesel, biodiesel blends, natural gas, and special fuels, and special fuel mixes with alcohol. SECTION 7. In Colorado Revised Statutes, 8-20-208, amend (1) (c) as follows: 8-20-208. Director to keep record. (1) The director of the division of oil and public safety shall keep a record of all inspections made, showing: (c) Number of gallons or gallon gasoline equivalents contained therein; SECTION 8. In Colorado Revised Statutes, 8-20-209, amend (2) as follows: 8-20-209. Access to premises - records. (2) Every distributor shall keep a complete and accurate record of the number of gallons, as covered in classes I and II, and gallon gasoline equivalents of natural gas, sold by such distributor and of the number of gallons or gallon gasoline equivalents of fuel used by such distributor, the date of such sales and of such use, and, except in the case of retail sales through filling stations operated by such distributor, the names and addresses of the purchasers. SECTION 9. In Colorado Revised Statutes, amend 8-20-211.5 as follows: 8-20-211.5. Labeling of containers. Throughout the state of Colorado, all visible containers and all devices for drawing motor fuel blends containing class I fuel products and at least two percent by volume of alcohol from underground containers at filling stations, garages, or other places where such products are sold or offered for sale shall be stamped or labeled in a visible place with information indicating the presence of alcohol in the motor fuel blend. If the volume of ethanol exceeds ten percent, or if the volume of methanol exceeds two percent, the stamp or label shall state the exact percentage. Such information shall appear on the front of the pump in a position clear and conspicuous to the driver's position, in at least one-half inch block letters, with information that identifies the maximum percentage by volume to the nearest whole percent of ethanol or of methanol or methanol with cosolvents. Natural gas storage, transfer, and dispensing equipment shall be stamped or labeled in accordance with NIST handbook 44, "Specifications, Tolerances, and Other Technical Requirements for Weighing and Measuring Devices", NIST handbook 130, "Uniform Laws and Regulations in the areas of legal metrology and engine fuel quality", and supplements thereto or revisions thereof. In addition, compressed natural gas storage, transfer, and dispensing equipment shall be stamped or labeled in accordance with NFPA 52, "Vehicular Gaseous Fuel Systems Code", and supplements thereto or revisions thereof, and liquefied natural gas storage, transfer, and dispensing equipment shall be stamped or labeled in accordance with NFPA 57, "Liquefied Natural Gas (LNG) Vehicular Fuel Systems Code", and supplements thereto or revisions thereof. SECTION 10. In Colorado Revised Statutes, amend 8-20-221 as follows: 8-20-221. Assisting in violations. It is unlawful for any person to aid or assist any other person in the violation of the provisions of this part 2, by depositing or delivering into any tank, receptacle, or other container, any liquid fuels, lubricating oils, or like products than those intended to be stored therein and distributed therefrom, as indicated by the name of the manufacturer or distributor or the trade name or trademark of the product displayed on the container itself, or on the pump, or on any other distributing device in connection therewith. SECTION 11. In Colorado Revised Statutes, 8-20-225, amend (1) as follows: 8-20-225. Measuring device - sealing - approval of prover and procedure. (1) No person, or agent or employee of any person, shall use any meter or mechanical device for the measurement of oil, gasoline, or liquid fuels unless the same has been proved in a manner acceptable to the director of the division of oil and public safety and sealed as correct by the director or one of the director's deputies. The director and the director's deputies are further authorized, if any such meter or mechanical device fails to comply with any of the provisions of this part 2, to seal the meter or mechanical device in a manner that prohibits its use until such meter or mechanical device complies with all of the provisions of this part 2, at which time the seal shall be removed by the director or the director's deputies. SECTION 12. In Colorado Revised Statutes, 8-20-230, amend (1) and (2) (b) as follows: 8-20-230. Submittal of plans. (1) Plans for all installations utilizing liquid fuel products, except for those liquid fuel products which that are defined as regulated substances and regulated pursuant to article 20.5 of this title, in storage containers of an aggregate of over fifteen hundred gallons water capacity, including gasoline stations, garages, stores, and all other places where said products are dispensed, shall be submitted to the director of the division of oil and public safety for approval before construction begins. (2) Plans for the preceding installations shall include: (b) Provisions for a containment of liquid fuels in the event of damage to fuel dispensers and attendant piping; SECTION 13. In Colorado Revised Statutes, amend 8-20-231 as follows: 8-20-231. Minimum standards. The design, construction, location, installation, and operation of liquid fuel product systems and equipment and the handling of liquid fuels fuel products shall conform to the minimum standards as prescribed by the applicable sections of the current edition of the national fire code published by the national fire protection association, as revised by the association from time to time. The minimum standards as prescribed shall also apply to marine and pipeline terminals, natural gasoline plants, refineries, tank farms, underground storage facilities, aboveground storage facilities, and chemical plants utilizing liquid fuels fuel products; except that the gallon limitations in such minimum standards shall not apply to aboveground storage facilities associated with mining, oil and gas production facilities, asphalt or concrete production, construction projects, and activities related thereto. Copies of the codes shall be kept and maintained in the office of the director of the division of oil and public safety at all times for examination by any interested person. SECTION 14. In Colorado Revised Statutes, 39-27-101, amend (7) (a), (11), (27), and (29); and add (7) (c) and (8.5) as follows: 39-27-101. Definitions - construction. As used in this part 1, unless the context otherwise requires: (7) (a) "Distributor" means: (I) A gasoline or special fuel broker and any person who sells special fuel to another distributor, broker, or vendor, and any vendor of liquified liquefied petroleum gases or natural gas; (II) Any person who acquires gasoline or special fuel from a supplier, importer, blender, or another distributor for the subsequent sale and distribution by tank cars, tank trucks, or both; or (III) Any person who refines, manufactures, produces, compounds, blends, or imports special fuel or gasoline; (IV) Any retailer who sells electricity to a user; or (V) Any person who operates a private commercial fleet that uses electricity. (c) Notwithstanding any provision of this subsection (7) to the contrary, a person who sells to a consumer natural gas or electricity that is supplied to a residential home through a meter is not a distributor with respect to such sale or use. (8.5) "Electricity" means an electric charge that is used primarily for the propulsion of motor vehicles. (11) (a) "Gallons" means gallons as measured on a gross gallons basis, as defined in section 8-20-201 (3), C.R.S. (b) "Gallons" also includes the "gallon gasoline equivalent" as defined in section 8-20-201 (2.7) (a), C.R.S., for the purpose of measuring liquefied petroleum gas, natural gas, or electricity. (27) "Retailer" means every person selling gasoline or special fuel in this state at the retail level of trade. (29) "Special fuel" means diesel engine fuel, kerosene, liquefied petroleum gas, electricity, and natural gas used for the generation of power to propel a motor vehicle on the highways of this state. "Special fuel" does not include gasoline as defined in subsection (12) of this section. SECTION 15. In Colorado Revised Statutes, 39-27-102.5, amend (7); and repeal (5), (6), and (8) as follows: 39-27-102.5. Exemptions on tax imposed - ex-tax purchases. (5) (a) The tax imposed by section 39-27-102 (1) (a) (II) (B) shall not apply to any motor vehicle that has been registered in this state, that is powered by liquefied petroleum gas or natural gas, and for which a valid decal has been acquired as provided in this subsection (5). The owners or operators of such motor vehicles shall, in lieu of the tax imposed under section 39-27-102 (1) (a) (II) (B), pay an annual license tax fee on each such vehicle in accordance with the following schedule of motor vehicle gross weights: Gross Weight in Pounds Annual License Tax Fee (I) 1-10,000 $ 70.00 (II) 10,001-16,000 100.00 (III) Over 16,000 125.00 (b) The executive director of the department of revenue shall annually, starting January 1 of each year commencing in 1984, collect or cause to be collected from owners or operators of the motor vehicles specified in paragraph (a) of this subsection (5) the annual license tax fee. Applications for such licenses shall be supplied by the department of revenue. In the case of a motor vehicle that is purchased or converted to liquefied petroleum gas or natural gas by January 1 of any year, a license shall be purchased for a fractional period of such year, and the amount of the license tax shall be reduced by one-twelfth for each complete month that shall have elapsed since the beginning of such year. (c) Upon payment of the tax required by this subsection (5), the executive director of the department of revenue shall issue a decal, which shall be valid for the current calendar year and shall be attached to the upper right-hand corner of the front windshield on the motor vehicle for which it was issued. (d) The identifying decal and license tax fee paid for each motor vehicle shall be transferable upon a change of ownership of the motor vehicle. Such transfer shall be accomplished in accordance with rules promulgated by the executive director of the department of revenue. (e) It is unlawful for any person to operate a motor vehicle required to have a liquefied petroleum gas or natural gas decal upon the highways of this state without such decal unless such motor vehicle is titled outside Colorado and all Colorado purchases are taxed pursuant to section 39-27-102 (1) (a) (II) (B) or such vehicle is otherwise exempt from the provisions of this part 1. (f) No person shall put, or cause to be put, liquefied petroleum gas or natural gas into the fuel tank of a motor vehicle required to have a liquefied petroleum gas or natural gas decal unless the motor vehicle has such decal attached to it or written or electronic evidence that a valid decal has been acquired for the motor vehicle and such evidence has been provided to such person or such person's employer. Sales of fuel placed in the fuel tank of a motor vehicle not displaying such decal or otherwise evidencing acquisition of a valid decal and for which the distributor is obligated to collect the tax specified by section 39-27-102 (1) (a) (II) (B) shall be recorded upon an invoice, which invoice shall include the date, the motor vehicle license number, the number of gallons or, in the case of natural gas, the energy equivalent in gallons placed in such fuel tank, and the tax due thereon. (g) Any person violating any provision of this subsection (5) is subject to the penalty provisions of sections 39-27-114 and 39-27-120. (h) Motor vehicles displaying a liquefied petroleum gas or natural gas decal are exempt from the licensing and reporting requirements stated in the remainder of this part 1. (6) (a) The department of revenue shall promulgate rules allowing for payment of the annual license tax fee, if applicable, and acquisition of the decal as set forth in subsection (5) of this section by a user directly from a vendor or distributor of liquefied petroleum gas or natural gas. (b) Such rules shall permit each vendor or distributor who participates in the program to return decals that are not issued by the vendor or distributor and remit the applicable annual license tax fees collected by the vendor or distributor not earlier than one hundred twenty days from the time decals are supplied to the vendor or distributor by the department of revenue. (7) Motor vehicles that are owned or operated by a nonprofit transit agency that receives public funds and that are used exclusively in performing the agency's nonprofit functions and activities shall be exempt from the provisions of subsection (5) of this section and from the special fuel tax imposed by section 39-27-102 (1) (a) (II) (B) upon liquefied petroleum gas, electricity, and natural gas. A person who purchases special fuel for the purposes set forth in this subsection (7) may, in accordance with section 39-27-103, apply to the department of revenue for a refund of the excise tax paid thereon. (8) The department of revenue is authorized to promulgate reasonable rules, consistent with this part 1, concerning annual license tax fees collected and decals issued pursuant to subsections (5) and (6) of this section, including, but not limited to, reporting procedures, reporting forms, and the penalties described in sections 39-27-114 and 39-27-120. SECTION 16. In Colorado Revised Statutes, 39-27-105, amend (1.3) (d) as follows: 39-27-105. Collection of tax on gasoline and special fuel. (1.3) (d) Distributors may aggregate figures stated in the reports required by this part 1 for liquefied petroleum gas and natural gas for sales of such fuels to a particular class or type of individual user. or holder of the decals authorized by section 39-27-102.5 (5). Distributors of liquefied petroleum gas and natural gas shall not be required to separately report the amount of sales to individual users. SECTION 17. In Colorado Revised Statutes, amend 39-27-107 as follows: 39-27-107. When users other than distributors must report. (1) Except as otherwise provided in section 39-27-102 for persons that export gasoline, every person not a licensed distributor who uses any gasoline in this state or who has in his or her possession any gasoline, other than that contained in the ordinary fuel tank attached to a motor vehicle or aircraft, upon which a licensed distributor has not paid or is not liable for the tax imposed in this part 1 shall file a sworn statement with the executive director of the department of revenue on or before the twenty-fifth twenty-sixth day of the calendar month on such form as the executive director prescribes and furnishes, showing the amount of gasoline so used and held, and shall pay to the executive director the tax imposed on all such gasoline. (2) (a) Except as otherwise provided in section 39-27-102 for persons that export special fuel, a person that is not a licensed distributor is liable and shall pay to the executive director of the department of revenue the tax imposed in this part 1 on all such special fuel if: (I) The person uses liquefied petroleum gas, natural gas, or electricity in this state for the propulsion of a motor vehicle; and (II) A licensed distributor has not paid or is not liable for the tax imposed in this part 1 on such special fuel. (b) Any person subject to paragraph (a) of this subsection (2) shall file a return and remit the tax annually, at the time the Colorado income tax of such person is due and payable as provided in article 22 of this title, for the amount of special fuel used for the propulsion of a motor vehicle during the preceding calendar year. The return must be on a form prescribed by the executive director of the department of revenue. (c) A person required to pay the tax pursuant to this subsection (2) must have a properly installed meter in order to accurately measure the special fuel used. The division of oil and public safety in the department of labor and employment shall establish minimum standards for meters that are consistent with national standards. SECTION 18. In Colorado Revised Statutes, amend 39-27-111 as follows: 39-27-111. Tax in lieu of all other taxes imposed. (1) The tax imposed by this part 1 shall be in lieu of all other taxes imposed upon gasoline or special fuel by this state or any political subdivision thereof, except for the tax on aviation fuel used in turbo-propeller or jet engine aircraft imposed pursuant to sections 39-26-104 and 39-26-202. (2) A person who pays the tax imposed by this part 1 pursuant to the provisions of section 39-27-107 (2), C.R.S., on special fuel that was subject to the state sales tax may apply for a sales tax refund in accordance with section 39-26-703. SECTION 19. Act subject to petition - effective date. This act takes effect January 1, 2014; except that, if a referendum petition is filed pursuant to section 1 (3) of article V of the state constitution against this act or an item, section, or part of this act within the ninety-day period after final adjournment of the general assembly, then the act, item, section, or part will not take effect unless approved by the people at the general election to be held in November 2012 and, in such case, will take effect on January 1, 2014.