The promised natural gas severance tax for Marcellus Shale production "clearly is dead," Pennsylvania Gov. Ed Rendell said Thursday, and he blamed the General Assembly's GOP members for refusing to "negotiate in good faith."
While the tax apparently is dead this year, the issue lives on in the campaigns of the Democratic and Republican candidates for governor, with Republican Tom Corbett vowing "no new taxes," and Democrat Dan Onorato calling for a "competitive" gas tax. The latest poll showed Corbett maintaining his front-runner status, but by a narrowing lead, with 48% in his favor and 46% for Onorato.
From Rendell's point of view, the severance tax appeared to still stand a chance last Tuesday, when he asked key state Democrats and Republicans for counter proposals to a compromise tax plan that he had outlined, which called for a 3% tax rate in fiscal year 2010-2011, a 4% tax rate the following year and 5% thereafter.
By Wednesday afternoon House and Senate Democrats had responded, indicating that they were willing to work within the framework of the compromise proposal, Rendell spokesman Gary Tuma told NGI.
"Without saying that they've accepted it lock, stock and barrel, they're basically willing to work from that compromise," Tuma said. But Republican lawmakers did not respond.
Senate Republican leaders made it clear that they would not return to work on the severance tax between the Nov. 2 election and when the new legislators were seated in January.
"They have said if there's a deal, they will come back before the election to vote on it, but they are not, they claim, going to hold any substantive legislative sessions in the lame duck session," Tuma said.
Senate Republicans late Wednesday responded to the governor's request to negotiate "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," Rendell said.
However, Republicans weren't the only ones who wouldn't compromise. The Democratic-controlled House last month overrode more moderate GOP proposals and passed a tax bill that included a 39 cents/Mcf tax rate (about 10%) severance (see NGI, Oct. 4). Sixty percent of the revenue was to be directed to environmental projects and municipal governments to deal with the impact of gas drilling, and 40% was to go into the state's general revenue account. Rendell previously proposed a 5% extraction tax, plus 4.7 cents/Mcf.
"It is irresponsible for Senate and House Republicans to refuse to compromise and simply turn their backs on these negotiations after days and weeks and months of work," Rendell, a Democrat, stated.
In early July, Rendell said, GOP members "signed a pledge to the people of Pennsylvania to enact a tax that requires drilling companies to pay their fair share for removing our state's natural resources from the ground and now they are walking away from that commitment."
The Republican members' "clear unwillingness to change their previous proposal or to resolve differences with the House Democrats and with my administration makes it obvious that they have killed the severance tax in this legislative session," said the governor.
"It is a broken promise, as well as a misguided policy decision that will harm our environment, will leave our local governments without the financial wherewithal to deal with the impacts of drilling in their communities, and will increase the budget challenges that Pennsylvania will face in the years to come."
The governor, who is stepping down from office at the end of the year, said the state's Republicans "clearly desire to put costs of natural gas drilling on the backs of Pennsylvania taxpayers, rather than on the large multinational oil and gas corporations who stand to reap enormous wealth from our state's resources."
In response House Republican spokesman Steve Miskin said the GOP caucus offered a "viable proposal," which was "consistently advocated by Minority Leader Sam Smith.
"Rep. Smith never once strayed from our position in any conversation or any meeting with Gov. Rendell, not once," Miskin said. "For him to say we haven't bargained in good faith, that's absolutely false."
Marcellus Shale Coalition (MSC) Executive Director Kathryn Klaber also responded.
"From the outset of these discussions, our industry has been working closely with elected leaders and key stakeholders in an effort to modernize the Commonwealth's legislative and regulatory framework," said Klaber. "These commonsense and shared goals will help ensure that capital investment will continue to flow into Pennsylvania, which is critical to expand job opportunities during this period of high unemployment and economic uncertainty."
The state Senate "deserves 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," she said. "While our commitment to achieve these shared goals remains steadfast, we're regretful that there wasn't closure brought toward achieving these commonsense initiatives during this legislative session. We must get this historic opportunity right; we cannot afford not to."
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