Pa. Governor Revives Gas Severance Tax
WBOY-TV
21 January 2010
By Pam Kasey
HARRISBURG -- Pennsylvania Gov. Ed Rendell renewed his call Jan. 14 for
a severance tax on natural gas.
"I continue to believe that we need a severance tax -- just as they are
doing in many other states," he said.
Rendell first proposed the tax in February 2009 as a partial solution
to budget problems.
The state was facing a $2.5 billion shortfall, local newspapers were
reporting, and Rendell cited estimates that expected gas production
from the Marcellus Shale would generate $100 million from the tax over
the following year and $630 million annually in five years.
The Natural Resource Severance Tax Act, House Bill 1489, introduced by
Rep. Camille "Bud" George, would have established a tax equivalent to
West Virginia's 5 percent on the value of gas extracted plus 4.7 cents
on every 1,000 cubic feet.
The bill was approved over the summer by the state House of
Representatives, but the Senate later eliminated the tax in a budget
bill.
Rendell also withdrew his call for the tax because gas prices
plummeted, and he said he wanted to give the Marcellus industry a
chance to get established.
But Jan. 14, he made it clear that he believes development of the
industry now is well under way.
The Pennsylvania Department of Environmental Protection reported 195
Marcellus wells drilled in 2008 and 763 in 2009 and expects
applications for 5,200 Marcellus wells in 2010, he said.
In addition, bids offered by five companies for gas leases in
Pennsylvania state forests came in at $128 million, more than double
the state's expectation.
"This week's auction results of more than $4,000 bid per acre ... is
further proof of how well the industry is doing and how much this
commodity is valued," Rendell said.
"Given that the industry is now firmly footed here and doing very well,
I believe we should pursue the imposition of a tax on Marcellus natural
gas extraction," he added. "I propose that this tax be effective this
July, and I hope the legislature will embrace this proposal."
Rendell's office is predicting a $500 million revenue shortfall for the
coming fiscal year, which puts pressure behind all new forms of revenue.
Matthew Maciorkoski in George's office said he expects that HB 1489
will be the vehicle for the severance tax.
It will have to be voted out of committee again, Maciorkoski said, some
time after the governor's Feb. 9 budget address.
He expects that bill's tax provisions will remain the same as West
Virginia's, with negotiations possibly taking place in the distribution
of the revenues.