Shale Daily / NGI All News Access

Pennsylvania Republican Proposes Severance Tax

Despite the opposition of Gov. Tom Corbett, Pennsylvania lawmakers from both sides of the aisle continue to look for ways to generate revenue from the Marcellus Shale.

State Rep. Kate Harper, a Republican from suburban Philadelphia, plans to introduce a severance tax that would direct revenue to specific state and local programs.

Modeled on a severance tax formula used in Arkansas, the bill would impose a 1.5% tax on the gross value of units at the wellhead for the first 60 months of production and would then jump to 5% for wells producing more than 90 Mcf/d of natural gas.

Revenue would be distributed roughly in thirds to education, local governments impacted by development and environmental programs, particularly the Environmental Stewardship Fund, also known as the Growing Greener program.

"There is growing support among Republican lawmakers in southeast Pennsylvania for having a severance tax. There is also growing support in the Senate for a having a severance tax. So I was trying to design a bill that would be compatible to both groups," Harper told NGI's Shale Daily, adding that while some Democrats have said her proposed tax rate is too low, she noted that a Democratic tax bill is stalled in committee.

During severance tax deliberations in late 2010 Harper successfully pushed through an amendment that dropped the share of revenue directed directly to the state General Fund to 40% from 60%, moving the difference to the Environmental Stewardship Fund.

Growing Greener funds a variety of environmental projects, ranging from farmland preservation to abandoned mine reclamation to infrastructure to community parks.

While the amendment garnered support from groups like the Pennsylvania Land Trust Association, the bill ultimately did not become law before the end of the sessions and the November elections that brought a new governor and new legislators into office.

Meanwhile, the Democratic tax bill took an interesting procedural twist recently.

Rep. Greg Vitali, a Democrat from the Philadelphia area, filed a discharge resolution last Wednesday to get his House Bill 33 out of the Finance Committee. The resolution creates a way for lawmakers to get a bill out of a standing committee after 15 days.

The House could vote on the resolution before the end of April, Vitali said.

HB 33 has been in the Finance Committee since Feb. 9 (see Shale Daily, Feb. 15).

"It's important that this bill continue to move because the revenues are desperately needed to help balance the budget, to fund Growing Greener and to recompense local governments for the cost they're incurring as a result of Marcellus drilling," Vitali said.

Vitali believes the bill would generate around $200 million this fiscal year and up to $420 million by fiscal year 2015-2016, down from the estimates of $245 million and $570 million, respectively, that Vitali made in February upon introducing the bill.

HB 33 would tax 5% of the value plus 4.6 cents of each Mcf produced in Pennsylvania, designed to compete with the fiscal regime imposed by neighboring West Virginia.

Although firmly opposed to a drilling tax, Corbett has shown a willingness to discuss "impact fees" that would compensate local governments for the cost of development (see Shale Daily, March 25, March 9).

Senate President Pro Tempore Joe Scarnati, a Republican from central Pennsylvania, recently announced plans to introduce impact fee legislation. Scarnati reportedly made the announcement at a Tioga County Conservation District legislative meeting.

Several surveys have found strong support in Pennsylvania for a tax of some kind (see Shale Daily, March 18).

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