NGI The Weekly Gas Market Report / NGI All News Access

Coalition Wants Severance Tax on Marcellus Shale Drilling

A severance tax should be levied on natural gas drilling in Pennsylvania -- including the state's prolific Marcellus Shale area -- with the revenues dedicated to conservation, local governments, Pennsylvania's Fish and Boat Commission and Game Commission, according to a coalition of environmental, conservation and sporting groups, municipal officials and state legislators.

"It's only fair and reasonable that drillers pay an extraction tax as they draw down this nonrenewable resource in Pennsylvania," said Andy Loza, executive director of the Pennsylvania Land Trust Association. "The extraction of natural gas can and will impose heavy costs on our communities and environment."

State legislators Bud George (D-Clearfield County), the chairman of the House Environmental Resources and Energy Committee, David Levdansky (D-Washington County) and Greg Vitali (D-Delaware County) appeared with the Coalition at a press conference in Harrisburg last week. Jan Jarrett, CEO of Citizens for Pennsylvania's Future, said she expects legislation calling for the severance tax to be introduced "fairly soon."

The coalition pointed to the results of a recent survey, which it said confirmed that Pennsylvania voters support using state revenues from gas drilling to support land, water and wildlife conservation. The survey found that a majority of voters support charging a tax on energy companies based on the amount of gas they drill in Pennsylvania, and more than three-quarters of those surveyed would support setting aside up to 25% of the money generated to fund conservation programs, they said.

While the coalition proposal would cover extraction of gas anywhere in the state, the impact would likely be felt most strongly by producers in the Marcellus. Trillions of cubic feet of gas -- some estimate as much as 500 Tcf -- lay thousands of feet underground in the Marcellus, which stretches from West Virginia to New York.

Pennsylvania House Majority Whip Bill DeWeese (D-Greene County) has introduced legislation that would allow counties to assess value to gas, oil and coalbed methane resources before they are produced and tax the producers (see NGI, March 16a). DeWeese said the tax would be assessed against the developer or driller, not the landowner or farmer on whose property the wells are located. DeWeese said nearly every state taxes natural resources; therefore, allowing such an assessment at the county level would not drive the drilling companies to neighboring states.

In laying out the state's 2009-2010 budget, Gov. Ed Rendell proposed a tax to generate $107 million a year from gas production. Rendell's proposal would institute a gas severance tax identical to the one currently in place in West Virginia -- 5% on the value of the gas at the wellhead, plus 4.7 cents per thousand cubic feet.

The Marcellus Shale Committee, which represents the oil and gas industry in the state, has said a severance tax outlined by Rendell would make development in Pennsylvania less appealing than in other large gas-rich states (see NGI, Feb. 9).

Earlier this month Manhattan Borough President Scott M. Stringer and several environmental groups called for a ban on gas drilling in New York's section of the Marcellus to protect its watershed from potential contamination (see NGI, March 16b). They said they were concerned about hydraulic fracturing of wells, which is done to stimulate production.

©Copyright 2009 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus