Pennsylvania Gov. Tom Wolf on Tuesday in the final budget address of his first term again called on a joint session of the General Assembly “to do the right thing” and pass a proposal to implement a severance tax on natural gas production.
Wolf, a Democrat, has proposed a severance tax every year since taking office. He wants the Republican-controlled legislature to pass a volumetric tax that would rise and fall with gas prices. Under the proposal, producers would pay 4-7 cents/Mcf based on a price range of below $3.00/Mcf to more than $6.00/Mcf. The plan would retain the state’s existing impact fee, which is levied on all unconventional wells during their first 15 years of operation, regardless of how much they produce.
“Pennsylvania is blowing most other states out of the water when it comes to production,” Wolf said. “And by joining every other gas-producing state and passing a severance tax, we could also join them by bringing billions into our own coffers. Ask these oil and gas behemoths to pay their fair share for extracting Pennsylvania’s bountiful resources, and we can build a brighter future for Pennsylvania.”
Since it was enacted in 2012, the state has collected more than $1.2 billion in impact fees. Last year’s collections are also expected to increase.
Marcellus Shale Coalition President David Spigelmyer said the industry already pays its fair share of taxes. “Unfortunately, the governor once again is putting politics first by proposing additional energy taxes that will make hiring and investing in Pennsylvania more difficult for local job creators, small businesses and manufacturers,” he said. “Pennsylvania’s natural gas tax -- a tax that’s paid in addition to any number of other state business taxes -- has generated more than $1.5 billion in new revenue for communities and environmental programs across the entire commonwealth.”
Wolf faces reelection this year. A crowded Republican primary field has shaped up to take on the incumbent, including gas industry allies such as House Speaker Mike Turzai and Republican state Sen. Scott Wagner.
Wolf’s $32.9 billion budget would increase spending by 3.1% from current levels, and includes no broad-based tax increases, relying solely on a severance tax to fully fund investments. The administration estimates that the severance tax would raise $250 million to help pay for education spending increases and more money to fight the state’s opioid crisis, among other things.
Last year, Wolf proposed a 6.5% severance tax. Such proposals, along with Wolf’s calls for other tax increases and Republicans’ unwillingness to support them, have led to partisan fights and budget impasses in recent years.
Lawmakers, however, have fought for years over whether to impose a severance tax. Pennsylvania has produced more than 5 Tcf in each of the last two years and has been the nation’s second largest gas-producing state behind Texas since 2013.
Wolf said Tuesday the industry’s power in the state should be challenged, claiming “special interests have put political courage in short supply.” A severance tax has been a popular proposition in statewide polls, but the fight is likely to be even more prominent as the general election draws near and the industry has pledged to continue battling a tax that representatives have said is unaffordable with commodity prices still challenged.