Pennsylvania House Panel Suggests 'Highest Shale Tax in U.S.'
Pittsburgh Post-Gazette
28 September 2010
By Tom Barnes, Harrisburg Bureau
HARRISBURG -- A key House committee approved a Marcellus Shale
extraction gas tax with a significant tax rate Monday, causing a
Wexford-based industry group to say it is "stunned" that legislators
want to give Pennsylvania the highest tax rate for shale gas in the
nation.
The House Appropriations Committee voted to approve the gas extraction
tax, with most Democrats in favor and all Republicans opposed. It would
impose a levy of 39 cents per thousand cubic feet (MCF) of gas
extracted. Legislators hope to generate at least $200 million, which
would be split among the state's general fund, localities with
Marcellus drilling and environmental costs.
The proposed tax could come up for discussion in the House as early as
today, with a vote perhaps this week. It would still have to be
approved by the Senate, which is controlled by Republicans, who are
unlikely to approve the tax in its present form. They favor a tax more
like the one in Arkansas, at 1.5 percent of the dollar value of gas
extracted.
Friday is looming as the Legislature's self-imposed deadline for
enacting a shale gas tax. Proponents of the tax say Pennsylvania is the
only shale gas state without such a tax, but gas industry officials say
the tax shouldn't be so large and noncompetitive that it would drive
gas drillers to other states.
Especially unhappy is the Pennsylvania Independent Oil and Gas
Association, based in Wexford. Its president, Louis D'Amico, wrote to
all legislators Monday saying his group is opposed to the latest tax
proposal, which would give Pennsylvania "the highest tax rate in the
nation."
He said association members "are unified in opposition to a severance
tax and are stunned that House leaders somehow believe a 39-cent per
MCF will benefit Pennsylvania." He claimed it would "drive investment
to other states with more predictable regulatory structures and hurt
the economic growth" the state has seen.
He called on legislators to develop policies that "realize the
long-term value of private investment over short-term revenue grabs
from a severance tax."
But Democrats said the gas-drilling industry has vast resources, is
investing millions of dollars in Pennsylvania and can afford a tax on
Marcellus Shale extraction.
There are still major questions to be resolved before a bill is passed.
The House bill would split the tax revenue 60-40, with the larger piece
going to the state general fund and the smaller piece going for
environmental improvements and to towns with roads damaged by drilling
activity. House Republicans say they'd like to see the overall split
reversed, with 40 percent to the state and 60 percent to local
communities.
The 39-cent per MCF figure is up slightly from the 35 cents suggested
earlier by Rep. David Levdansky, D-Forward. It also differs from Gov.
Ed Rendell's idea to copy the West Virginia tax plan: 5 percent on the
value of the gas extracted plus 4.7 cents per MCF. Mr. Rendell said
Monday he still prefers his tax idea.
If the House does take the bill up for debate today, other changes are
possible, because two dozen amendments have been proposed. There also
is disagreement on whether to allocate $50 million of the Marcellus tax
revenue for statewide property tax reduction, augmenting the $750
million being produced from slots revenue.
Mr. Rendell doesn't think gas tax revenue should go for property tax
relief. He said more slots-generated money will be available from the
SugarHouse casino that just opened in Philadelphia.
He wants to use perhaps $70 million of shale tax money to balance the
state budget, which is $282 million in the red.
Towns that have Marcellus Shale drilling have suffered road damage from
heavy equipment and want money from the tax to make repairs. Some local
schools in the Marcellus area want some revenue because their schools
are expanding as workers move in with their families.
Environmentalists want some of the money used to replenish the state's
Growing Greener program, which seeks to preserve farmland and green
space. Others want the revenue used to help the Department of
Environmental Protection make up for budget cuts that have occurred in
the past two years.
Bureau Chief Tom Barnes: tbarnes@post-gazette.com or 717-787-4254.