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Pennsylvania's Wolf Vows to Keep Pushing NatGas Severance Tax in Future Budgets

Pennsylvania Gov. Tom Wolf has confirmed that a deal to end a more than four month state budget impasse doesn't include a severance tax on unconventional natural gas production, but he added that he won't give up on that proposal in future negotiations.

Wolf told reporters at an event on Thursday in Southeast Pennsylvania that he's "not getting everything I wanted," as a deal shapes up to get the state on track to balance its budget. Wolf, a Democrat, faced-off with Republicans in July after he vetoed their $30.1 billion budget, which did not include a handful of new taxes and tax increases aimed at plugging the state's $2 billion-plus deficit, providing more funding for public schools and reducing property taxes (see Shale Daily, July 1).

"I am sad that we couldn't get a shale tax in this round," Wolf told reporters. "But I have made sure that everybody I've been negotiating with knows that I have not given up on that."

Wolf took office in January after campaigning to enact a severance tax on unconventional natural gas production. Throughout the budget season, Wolf has also pushed hard for an increase in the state's personal income and sales taxes, as well. But both the industry and Republicans have pushed back, saying producers can ill afford additional costs as they confront low commodity prices and continue to cut back as a result.

In February, Wolf proposed a plan to tax unconventional gas production at 5%, plus a 4.7 cent/Mcf volumetric fee (see Shale Daily, Feb. 11). Before a symbolic vote last month in the state's Republican-controlled House of Representatives to determine if there was enough support for his proposal, Wolf kept the volumetric fee but scaled back the rate to 3.5%. The severance tax, along with a proposal to increase the state's personal income tax, was voted down 127-73, effectively ending parts of Wolf's budget plan (see Shale Daily, Oct. 7).

Republican and Democratic representatives told NGI's Shale Daily on Tuesday that the severance tax proposal is not part of the framework to resolve the budget stalemate (see Shale Daily, Nov. 10). Instead, lawmakers appear to be close to agreeing on a proposal that would raise the state's sales tax 21%, or by about $2 billion per year, to help reduce property taxes and generate more revenue to balance the state budget.

The plan wouldn't eliminate the budget deficit, however. For years now, lawmakers on both sides of the aisle have tried but failed to enact a severance tax (see Shale Daily, Jan. 28, 2014).

An impact fee is charged instead for all unconventional wells in the state during their first 15 years in operation, regardless of production. It is calculated with a multi-year schedule that is based on the average annual price of gas. The fee has generated nearly $856 million since it was passed in 2012. The revenue is allocated to impacted communities and state agencies.

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