Rendell: No Drilling Moratorium
Pushing 'robust severance tax' to address impact of shale gas
production
Pittsburgh Post-Gazette
8 September 2010
By Sean D. Hamill,
There won't be a Marcellus Shale natural gas drilling moratorium in
Pennsylvania while Ed Rendell is governor -- even if that means only
four more months.
Before he made a speech Tuesday in Washington, Pa., in his ongoing push
for a "significant" natural gas severance tax, Mr. Rendell told a group
of two dozen protesters worried about the drilling that a moratorium
like New York state has enacted will never happen here.
"I would like tomorrow to be able to comb my hair in a pompadour," the
balding Mr. Rendell told one of the protesters, "but it's not going to
happen."
The first reason, he said, is "because I disagree with you; I think we
can find a balance" between encouraging the natural gas industry growth
and keeping the environment safe.
"The second reason is because it doesn't matter what I think. The
Legislature will never vote for a moratorium," he said.
Told by one protester that it might have a better chance if Mr. Rendell
got behind it, the Democratic governor -- who is ending his eight-year
tenure this year due to term limits -- quipped: "If I got behind it, it
might have even less support in the (Republican-controlled) Senate."
Instead of a moratorium, he said, Pennsylvanians concerned about the
effects of natural gas drilling should join him in pushing the
Legislature to enact a "robust severance tax" over the next month.
Money from that tax could be used to help -- in a revenue-sharing deal
-- local governments deal with some of the concerns about industry
trucks' impact on local roads and to help boost state revenue coffers
which could mean more enforcement, he said.
He didn't win any converts from the group of protesters, though.
"I want a moratorium," Jet Miskis, a wildlife artist from Peters, told
the governor. "I mean, can you explain to me why cattle are dying out
here?"
Gas industry officials, legislative leaders and both gubernatorial
candidates agree that a moratorium is a bad idea and has no chance for
passage in the Legislature.
"I don't think there's support in the Senate," said Drew Crompton,
spokesman for Senate President Pro Tem Joe Scarnati. "The moratorium
idea has been out there for awhile now and it's never gotten any
traction."
Spokesmen for state Attorney General Tom Corbett, the Republican
nominee for governor, and Allegheny County Chief Executive Dan Onorato,
the Democratic nominee, said the candidates agree with Mr. Rendell that
a moratorium is a bad idea.
The candidates disagree about Mr. Rendell's severance tax idea, though.
"This industry can be taxed out of existence in Pennsylvania," said
Kevin Harley, campaign spokesman for Mr. Corbett, who opposes any
severance tax. "To try to pass a tax simply to fill a budget hole is
irresponsible."
Brian Herman, spokesman for Mr. Onorato, who supports imposing a
severance tax, said: "Well, Mr. Corbett is clearly more interested in
helping the industry than the people of Pennsylvania."
As part of the budget deal crafted by legislative leaders and the
governor earlier this year, a Marcellus Shale tax has to be approved by
Oct. 1 to raise up to $70 million this fiscal year to help erase a $282
million budget deficit.
The governor said he supports a severance tax identical to one already
enacted in West Virginia that would impose a 5 percent tax on the value
of the extracted gas, plus a levy of 4.7 cents per thousand cubic feet
of gas.
When he proposed his budget earlier this year, his budget office
predicted such a tax could raise up to $475 million a year in new
revenue within five years.
With some companies predicting to their shareholders that they may make
as much as a 64 percent return on their investment in drilling for gas
in the Marcellus Shale vein that runs throughout the Appalachian
Mountains, the industry can afford to pay a significant tax, Mr.
Rendell said.
"But the industry is fighting us," he said Tuesday.
The industry is proposing a tax based on the state of Arkansas's tax
rate that, for some expensive and low-producing wells, would start at
11/2 percent on the value of the extracted gas in the first three years
of a well's life, increasing to 5 percent in later years.
Kathryn Klaber, executive director of the Marcellus Shale Coalition, an
advocacy group representing almost all of the state's shale gas
producers, said the Arkansas model is one the coalition has been
encouraging because "we view it as a good way to encourage development
and return some revenue to local governments."
But, Mr. Rendell said, "about 50 percent of all the natural gas is
pumped out during the first five years" of a well's producing life.
Allowing the industry to be taxed at just 11/2 percent in the first
three to five years "is ridiculous," he said. "And I won't sign
legislation like that."
Sean D. Hamill: shamill@post-gazette.com or 412-263-2579.