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Marcellus Coalition Regrets Pennsylvania Inaction on Gas Tax

With a proposed natural gas severance tax for Marcellus Shale production apparently not forthcoming from the Pennsylvania General Assembly before the Nov. 2 election, one group representing the industry said it is "regretful that...common sense legislative initiatives" have not been adopted by the state.

While leaders in the state's Senate deserve credit "for their months of work in crafting a competitive, well balanced package of reforms that would help ensure Pennsylvania remains a leader in responsible shale gas development...we're regretful that there wasn't closure brought toward achieving these common sense initiatives during this legislative session," said Marcellus Shale Coalition (MSC) Executive Director Kathryn Klaber. "We must get this historic opportunity right; we cannot afford not to."

After months of maneuvering and nearly two weeks of intensive talks at the governor's mansion in Harrisburg that included members of both parties from both chambers of the General Assembly and industry representatives, Gov. Ed Rendell last week said the promised natural gas severance tax "clearly is dead," blaming GOP lawmakers for refusing to "negotiate in good faith" (see Shale Daily, Oct. 22).

The House passed legislation (SB 1155) last month that included a 39 cents/Mcf tax rate (see Shale Daily, Oct. 5). Some Republicans have called for a 1.5% tax for a well's first three years and then increasing that to 5%.

Last week Rendell asked key state Democrats and Republicans for counter proposals to a compromise tax plan that he had outlined earlier this month calling for a 3% tax rate in fiscal year 2010-2011, a 4% tax rate the following year and 5% thereafter (see Shale Daily, Oct. 21). Democrats agreed to consider the proposal, but Senate Republicans responded "with a letter offering the same 1.5% rate, the same giveaways to the industry, and excuses about the legislative process to try and justify their own inaction," the governor said. On Monday Rendell renewed his call for negotiations on the gas tax and said he will discuss "Senate Republicans' unwillingness to compromise" on the severance tax at a press conference Tuesday afternoon.

A Rendell spokesman said the governor will also sign an executive order Tuesday "instituting a strategic moratorium on future drilling operations in the state."

MSC members are not opposed to a severance tax in the state, Klaber said.

"As part of a well thought out and considerate comprehensive overhaul that includes legislative and regulatory modernizations, our industry maintains its support for a competitively structured severance tax that allows for capital recovery and reinvestment, comparable to other leading shale gas-producing states, such as Arkansas, Texas and Louisiana," Klaber said.

Senate Republican leaders have made it clear that they will not return to work on the severance tax between the Nov. 2 election and the seating of newly elected legislators in January.

Republicans currently hold a 30-20 majority in the Pennsylvania Senate, while Democrats hold a 104-99 majority in the House. Neither chamber is scheduled to reconvene prior to the election. Rendell leaves office in January and candidates to replace him have butted heads during their campaigns over the severance tax issue. Republican Tom Corbett has vowed "no new taxes," and Democrat Dan Onorato has called for a "competitive" gas tax.

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