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Taxpayer Advocate Calls Marcellus Fee a 'Tax'

The debate over generating revenue from the natural gas industry in Pennsylvania took a linguistic turn this week when a national tax opponent said that an impact fee working through the General Assembly is actually a tax.

"Make no mistake, this proposal is a tax increase based on any honest and objective analysis," Grover Norquist, president of Americans for Tax Reform, wrote in a letter last Friday to state Sen. Mary Jo White, a Republican from rural western Pennsylvania and chair of the Senate Environmental Resources and Energy Committee.

That proposal, SB 1100, is technically an "impact fee" designed to help communities impacted by drilling. The current proposal would charge operators at least $10,000 per well, adjusted for gas prices (see Shale Daily, April 29).

Norquist said the industry already pays its "fair share" in Pennsylvania through state and local taxes and is "a beacon of hope in an uncertain economy that is desperately in need of job creation" (see Shale Daily, May 5). He said backers of the fee needed to show that the industry isn't paying for its impacts. "The fact is that SB 1100 creates a slush fund that directs money for pet projects that have nothing to do with the environmental impact of natural gas extraction," he wrote.

As such, Norquist called the impact fee a violation of the Taxpayer Protection Pledge that Gov. Tom Corbett and 34 members of the Pennsylvania General Assembly signed, a pledge promising not to increase any taxes while in office.

Not so, said Senate President Pro Tempore Joe Scarnati, the central Pennsylvania Republican who proposed the fee. Responding to Norquist in a letter on Wednesday, Scarnati said he is more opposed to taxation as anyone in state government and specifically designed his impact fee so that it would not violate the Taxpayer Protection Pledge.

Specifically, he wrote, the fee is not a tax because it doesn't bring any money to the state General Fund; it is a fixed amount per well similar to the municipal waste fee and it only pays for impacts connected to natural gas drilling. He called the "slush fund" accusation "simply inaccurate."

"The permissible worthwhile efforts to be funded from the fee are specifically delineated in the legislation: impacted local roads and bridges, conservation clean-up projects, emergency preparedness, watershed protection, dam safety projects, and plugging and abandoning and orphaning oil and gas wells, to name several," Scarnati wrote.

Scarnati asked Norquist to discuss the impact fee with Range Resources Corp., Chesapeake Energy Corp. and Chief Oil & Gas LLC and other natural gas operators in Pennsylvania. "They will all reinforce their belief that a reasonable, responsible severance fee is a welcomed proposal that will aid in their efforts to be good corporate citizens, will go directly to local impacted areas, and will not impair their economic competitiveness," Scarnati wrote.

Noting that the Taxpayer Protection Pledge contained an "offset provision," Scarnati wrote that he is looking into creating "several business tax reductions that would benefit shale companies" that would exceed the impact fee.

The tax-versus-fee debate existed long before Norquist entered the ring in Pennsylvania.

Corbett pledged during his campaign not to raise any taxes and has repeatedly said he would veto any legislation that would add money to the General Fund by taxing the natural gas industry. With the state facing a $4.2 billion shortfall and the public widely in favor of a severance tax, many see the impact fee as a politically feasible solution.

Meanwhile, several proposals that are undeniably taxes still await action (see Shale Daily, May 11; April 19).

The oldest among those took an unusual turn this week. State Rep. Greg Vitali, a Democrat from the Philadelphia area, filed a discharge resolution in April to get HB 33 out of a committee, where it had been since he introduced it since February. The resolution creates a way for lawmakers to get floor vote on a bill stuck in committee. On Wednesday the House blocked that resolution and voted to send the bill back to committee.

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