Effective December 26, 2010, the Pennsylvania General Assembly amended the Farm Land and Forest Land Assessment Act, commonly referred to as the “Clean and Green” statute, to preserve certain real estate tax benefits for land used for oil and gas development. The Clean and Green program provides reduced property tax assessments for certain agricultural and forest land. Historically, if the owner of clean and green property “split-off” part of the property by sale or lease, the entire property lost its preferential status and was subject to “roll-back” tax in the amount of the Clean and Green tax benefit received for the previous seven years.
Senate Bill 298, signed into law as Act 2010-88, amended the Clean and Green statute to preserve Clean and Green benefits if the “split-off” land is “devoted to the exploration for and removal of gas and oil, including the extraction of coal bed methane, and the development of appurtenant facilities” such as roads, bridges, and pipelines. So long as the remainder of the property continues to be used for qualifying Clean and Green purposes, the property owner will not be subject to roll-back tax on the entire property. Instead, the roll-back tax will apply only to the restored well site (typically three to five acres) and any land “incapable of being immediately used” for qualifying Clean and Green purposes. In addition, Act 2010-88 permits a clean and green property owner to “temporarily lease a portion of the land for pipe storage yards” without forfeiting the preferential assessment for the entire parcel.
The potential loss of Clean and Green tax benefits has long been a source of concern for oil and gas companies and property owners alike. Act 2010-88 should alleviate those concerns by clarifying that oil and gas leases in most cases will have minimal impact on property owners’ preferential clean and green real estate tax assessments.