U.S. Rep. Allyson Schwartz of Jenkintown, PA, who has declared her candidacy for the gubernatorial race in 2014, said she would enact a 5% severance tax on natural gas if elected, adding that over a decade such a tax could generate $13.2 billion in revenue for the state.

In a 13-page document, the Schwartz campaign accused Republican Gov. Tom Corbett of “squandering” an opportunity to bring more revenue into state coffers with his opposition to a severance tax (see Shale Daily, March 25, 2011), and called the drilling impact fee enacted under Act 13, the state’s omnibus Marcellus Shale law, “wholly inadequate.”

According to data from the Pennsylvania Public Utility Commission (PUC), the impact fee generated nearly $293 million in revenue for unconventional wells drilled in 2012, and about $206 million for wells drilled through 2011 (see Shale Daily, May 15; Sept. 12, 2012).

“A common sense gas tax could have raised significantly more for the state’s needs,” the Schwartz campaign document states. “Other states charge a tax based on the amount of natural gas produced, and receive more revenue from their gas resource as production surges…Pennsylvania is missing out as wells drilled in the past few years are now running at full capacity.”

Last year, the Pennsylvania Budget and Policy Center, a nonpartisan policy research group, asserted that the state could have collected nearly twice the revenue it received in impact fees on Marcellus Shale natural gas drilling if it had implemented a severance tax instead (see Shale Daily, Sept. 17, 2012).

The impact “fee” was conceived as an end-around to gain support from Republicans, who, in line with the conservative Tea Party, steadfastly refused to consider any new taxes (see Shale Daily, Feb. 8, 2012). During the gubernatorial campaign in 2010, Corbett said he would not support a severance tax.

According to the Washington, DC-based Resources for the Future’s Center for Energy Economics and Policy, 26 of 31 states surveyed levy severance taxes on natural gas. Of those, 18 states — including Texas, West Virginia and Wyoming — levy a severance tax based on a percentage of the market value of the gas extracted, while five states — California, Louisiana, North Carolina, North Dakota and Ohio — levy a tax based on a fixed dollar amount. Three states — Indiana, Oklahoma and Utah — use a hybrid system.

Neighboring West Virginia, a mid-range volume producer, charges 12.3 cents/Mcf, which equates to a 5% severance tax.

The Democrats plan to hold their gubernatorial primary on May 20, 2014. Two former secretaries of the Pennsylvania Department of Environmental Protection (DEP) and both Democrats, John Hanger and Kathleen McGinty, have also declared their candidacy for governor.