Rendell: Drilling Won't Be Stopped

Washington PA Observer Reporter
8 September 2010

Gov. Ed Rendell told more than 50 state, local and county officials, leaseholders and environmentalists Tuesday that the state Legislature has four to five weeks to pass a severance tax on natural gas drilled in Pennsylvania's Marcellus Shale strata.

During an hourlong news conference at Washington's Courthouse Square office building, the governor was adamant about two issues. He told protesters outside and repeated during the news conference inside that he won't support a moratorium on drilling in Pennsylvania, as has been done in New York state.

"We can't have a moratorium, and we should not have a moratorium," he said, adding that the economic potential of the Marcellus Shale is too great.

At the same time, Rendell also said he'll veto any severance tax proposal that isn't sufficient to provide the necessary environmental protections for the state's highways and bridges, streams and hunting grounds.

"I'm not going to sign something that's a giveaway to the (oil and gas) industry," he said.

"The battleground is the next four to five weeks," Rendell said, adding that he expects "a fair tax" to handle all protections of the state's natural resources without chasing away an industry that he said has led the state in employment opportunities during the current recession.

"I don't want to kill the golden goose," he said.

During the news conference, which also featured comments from state Department of Environmental Protection Secretary John Hanger and John Arway, executive director of the state Fish & Boat Commission, Rendell said he favors enactment of a severance tax based on the one that West Virginia levies on its Marcellus Shale drillers.

He said that levy is a 5 percent fee on the price of natural gas at the wellhead and 4.7 cents on every thousand cubic feet of gas produced.

But the Legislature won't be able to deliver what the governor wants - or any other version of a severance tax - until lawmakers can sort out the myriad proposals for such a levy, according to state Rep. Tim Solobay, D-Canonsburg.

When asked how many severance tax proposals are on the table in Harrisburg, Solobay raised his hands.

"As many as you can count on both hands," he said.

Later, he told reporters that there are so many variables to consider that it was impossible to say "what the final product will look like."

Solobay said the final version that has the best chance of passing will be one that considers the necessary environmental protections as well as language that lets the drilling industry become more efficient.

"If it's just the tax only and nothing else, it's going to be a hard vote," he said.

When a woman in the audience said she had heard that the gas industry was writing the tax legislation, Rendell responded, "They can write the tax, but I'll veto it. They can write any tax they want, but it won't become law."

Kathryn Klaber, executive director of the Marcellus Shale Coalition, which represents drillers and suppliers across the state, said while there has been constant dialogue between the industry and members of the Legislature, it is clearly the General Assembly's job to pass the tax.

She said any legislation that is passed needs to be comprehensive, recognizing the needs of local government, the interests of the industry, the confidence of the public and the environmental and safety issues.

"This is the single most important economic story in Pennsylvania in generations," she said. "It's not just (a tax) to fill a budget hole."

Hanger told the audience that DEP's need is twofold.

The agency wants to protect the state's natural resources while ensuring that drillers do their work safely, he said.

He noted that in the last two years, the state has issued 4,600 permits for drilling wells in the Marcellus, with 1,900 wells drilled across the commonwealth.

"By 2014, Pennsylvania could be producing about 10 percent of the country's natural gas," Hanger said, arguing that with billions of investment dollars pouring into the Marcellus drilling industry here from Norway, Britain, India and Japan, investors shouldn't be surprised that Pennsylvania wants to levy a severance tax similar to what already exists in other states.

Rendell noted that over the past year in Washington County, there have been 413 permits issued and 244 wells drilled.

While stating that natural gas from the Marcellus can be used to power cars and to generate electricity, Rendell said that beyond its vast economic potential, "It's American-produced energy."

He said the version of the tax he wants would provide "substantial" amounts of revenue to a local share for municipalities with Marcellus drilling and to the DEP and urged local political leaders to contact their legislators and support it.

But state Rep. Jesse White, D-Cecil, said later Tuesday that legislators need to be wary of passing severance tax legislation that may not adequately handle local and environmental needs. He noted that in June he and other legislators successfully blocked a request from Rendell that would have put 80 percent of the collected tax into the state's general fund.

"It has to stay local, and there has to be an environmental element. There is no reason in the world that money that will ultimately end up in Washington County needs to go through Philadelphia or Harrisburg," White said.

Arway acknowledged that the Fish & Boat Commission was not well-prepared "for this rush to further develop our natural gas fields. The Fish and Boat commission staff are trying to do our duty by reviewing permits and patrolling streams, but it is currently on the backs of our anglers and boaters.

"Our message is simple. Pass the severance tax, reserve a portion to support conservation programs and remember that the Fish & Boat Commission is an important part of conservation."