Shale Daily / NGI All News Access

Pennsylvania Senate to Again Consider Gas Severance Tax

When the Pennsylvania General Assembly returns to its regular session next week it will once again face a proposal to institute a severance tax on natural gas production.

SB 905, sponsored by state Sen. John Yudichak (D-Luzerne), would place a 2% tax on natural gas at the wellhead for three years and 5% thereafter, except wells producing less than 150 Mcf/d, which would remain at the 2% rate. The resulting revenue would be deposited into a natural gas severance tax fund within the state's general fund, where it would be spent on environmental and local infrastructure projects necessitated by the impact of gas drilling.

Last year Pennsylvania's Democratic-controlled House overrode more moderate Republican proposals and passed a tax bill that included a 39 cents/Mcf rate (about 10%) (see Shale Daily, Oct. 5, 2010). Despite commitments during last year's budget negotiations to pass a severance tax on gas drillers, Pennsylvania Senate lawmakers balked on the issue during a lame duck session (see Shale Daily, Nov. 18, 2010).

Republicans now hold majorities in both the Pennsylvania House and Senate and Gov. Tom Corbett, who is also a Republican, vowed "no new taxes" -- including a severance tax on natural gas -- during his campaign last year (see Shale Daily, Oct. 28, 2010). As promised, Corbett did not include a severance tax on Marcellus Shale production in his first budget (see Shale Daily, March 9).

A majority of Pennsylvania residents support a severance tax on gas production to help close a projected $4 billion state budget gap, according to the results of recent surveys (see Shale Daily, March 18; Jan. 18; Dec. 28, 2010).

But at the first meeting of the Corbett-appointed Marcellus Shale Advisory Commission last week, Lt. Gov. Jim Cawley made it clear that a statewide severance tax remains "off the table" (see Shale Daily, March 29).

SB 905 has been referred to the Environmental Resources and Energy Committee, where Yudichak is chairman.

Another bill referred to the committee (SB 600), which was authored by Sen. Kim Ward (R-Westmoreland), would institute civil penalties for Department of Environmental Protection (DEP) rule violations at unconventional wells of $50,000, plus $2,000 for each day the violation continues, and would require DEP to post inspection reports on its website.

The Senate is scheduled to reconvene April 5.

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