Pennsylvania Gov. Tom Wolf on Monday joined a bipartisan group of lawmakers to throw his support behind two bills that would implement a severance tax on natural gas production.
Senate Bill 1000 and its companion, House Bill 2253, include a proposal unveiled by Wolf earlier this year. Wolf, a Democrat, has proposed a severance tax every year since taking office in 2015. The new bills would establish a volumetric severance tax that would rise and fall with gas prices. Under the legislation, producers would pay about 4-7 cents/Mcf based on a price range of below $3.00/Mcf to more than $6.00/Mcf.
Dubbing it a “commonsense severance tax,” and noting during a press conference that Pennsylvania is the “only gas-producing state in the nation” without one, the governor called on legislators to pass the bills.
To introduce the legislation, Wolf joined state Sen. Thomas Killion and Rep. Bernie O’Neill, both Philadelphia-area Republicans that represent a part of the state where natural gas is viewed differently than in the shale fields of western Pennsylvania. Other Democratic co-sponsors are state Sen. John Yudichak and Rep. Jake Wheatley.
Wolf said the severance tax would generate an estimated $248.7 million in the next fiscal year that could be used to address budget needs. The proposal would also keep the impact fee, which is levied on all unconventional wells during their first 15 years of operation. The impact fees have collected more than $1 billion since they were established in 2012.
The new bills would also ensure that impact fee collections, which have declined in recent years on lower commodity prices, don’t fall below $200 million annually. Additionally, the legislation would help ease lengthy permitting delays and improve turnaround times, something that the gas industry has complained about for years.
Marcellus Shale Coalition President David Spigelmyer called the bills “election-year political stunts,” as Wolf faces reelection this year. Spigelmyer also said the public is tired of “more tax-and-spend” proposals. API Pennsylvania Executive Director Stephanie Catarino Wissman also gave the legislation a cold reception, disparaging it by saying Wolf’s annual campaign to get a severance tax passed has become a quarterly occurence, adding that it would be duplicative given the impact fee most shale drillers already pay.
A severance tax has polled well among the public in recent years, and more than 60 bills have been introduced over the last seven years or so to implement one in the nation’s second largest gas producing state. However, every bill has failed.
While the GOP-controlled Senate passed a revenue package last year to fund the state budget, which included a volumetric fee on gas production, the proposal died in the House, where Republican leadership remains staunchly opposed to the idea.