Saying it is essential to help Pennsylvania address a serious public schools funding shortfall, Gov. Tom Wolf (D) formally asked state legislators to enact a 4.7¢/Mcf natural gas severance tax. The levy would generate more than $1 billion in revenue prior to exemptions, he said in a Feb. 11 policy memorandum to legislators.
Oil and gas groups in the commonwealth anticipated the governor’s move. Officials from the Pennsylvania Independent Oil and Gas Association and API-PA, a division of the American Petroleum Institute, each said on Feb. 9 that a severance tax on gas produced in Pennsylvania would be a bad idea.
Wolf has previously suggested that a gas severance tax would be an effective way to address $1 billion of Pennsylvania public education funding cuts in recent years. The proposal is modeled on West Virginia’s similar tax, he said in his Feb. 11 memorandum.
“In addition, this approach has the benefit of being field tested,” he told the legislators. “West Virginia offers proof that a state can build a thriving unconventional natural gas industry while simultaneously using a portion of the proceeds to help make a better future for its citizens.”
The 5% severance tax on both conventional and unconventional gas production would not be in addition to Pennsylvania’s existing impact fee, the governor emphasized. “My proposal would continue the payments made to communities impacted by drilling that are currently funded by the impact fee,” he said.
Exemptions would be allowed for gas given away for free, gas from low producing wells, and gas from wells brought back into production after not having produced marketable quantities, Wolf said.
‘Long-term price crisis’
Citing the governor’s statement in his Feb. 9 budget address that “Pennsylvania’s businesses do not have the luxury of pretending that problems don’t exist,” PIOGA Pres. Lou D’Amico said that day: "No industry in the commonwealth is more aware of this fact than natural gas producers and their service companies, which are dealing with a long-term commodity price crisis and new state regulations that will unnecessarily drive up the cost to produce energy in this state.”
Wolf’s proposal for a gas production severance tax, which would come on top of poor market conditions and regulatory burdens, is simply an effort to punish Pennsylvania’s oil and gas producers, he continued. “If enacted, it will put people out of work, drive more businesses into bankruptcy, reduce energy production and result in less net-tax revenue to the state,” D’Amico warned.
API-PA Executive Director Stephanie Catarino Wissman noted that Pennsylvania is the only state that requires an additional impact tax that is collected from every shale drilling site within its borders. The impact tax alone has distributed more than $800 million in just 4 years, most of which goes directly to local communities. No other extraction industry pays such a tax in Pennsylvania, she said.
“This winter consumers throughout the commonwealth are benefiting from record low energy prices,” Wissman said on Feb. 9. “The shale revolution that was born in Pennsylvania has saved consumers an estimated $1,200 per household annually. A homegrown, successful gas industry has saved consumers money and has created thousands of jobs all while utilizing clean-burning gas developed right here in Pennsylvania.”
Contact Nick Snow at firstname.lastname@example.org.