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Maryland Lawmakers to Consider Severance Tax Bills

A pair of Maryland lawmakers have introduced a bill that would implement a 15% severance tax on the wholesale market value of natural gas produced in the state beginning Jan. 1, 2013.

The severance tax described in HB 907 would not apply to wells producing less than 5 Mcf/d, wells that produce gas used on the same property for domestic or agricultural purposes, or storage wells. Revenue produced by the severance tax would be deposited in a separate account within the state's Oil and Gas Fund. The bill, which was introduced last week by Del. Maggie McIntosh (D-Baltimore) and Del. Sheila Hixson (D-Montgomery), has been assigned to the House Ways and Means Committee.

Earlier this month Sen. George Edwards (R-Allegany) introduced a bill (SB 768) that calls for a 2.5% severance tax on natural gas, with the revenue going toward the state's Natural Gas Impact Fund.

In a report released last month, Maryland's Marcellus Shale Advisory Commission (MSAC) recommended that the General Assembly impose a fee on natural gas leases and a statewide severance tax to offset the cost of managing development (see Shale Daily, Jan. 12). The MSAC's proposed severance tax would create a Shale Gas Impact Fund to offset costs that are attributed to the industry at large.

Although Maryland does not yet have a state-level severance tax on natural gas, the report noted that Garrett and Allegany counties, two rural counties in the western panhandle that overlie the Marcellus, already levy county-level taxes: 5.5% in Garrett and 7.7% in Allegany. Using U.S. Geological Survey estimates that the Maryland portion of the Marcellus holds as much as 2,383 Bcf of technically recoverable gas, each 1% of statewide severance tax would bring in between $27.9 million and $93.7 million at a constant gas price of $3.93/Mcf, according to the report.

The MSAC did not recommend a tax rate but said the structure should be designed to offset the cost of state activities related to development, both site-specific and regional impacts.

The Maryland General Assembly is also considering HB 296, which would ban hydraulic fracturing wastewater imports, storage, treatment, discharge or disposal generated in other states (see Shale Daily, Feb. 2).

The General Assembly began its 90-day legislative session on Jan. 11 and is scheduled to adjourn on April 9.

Pennsylvania Gov. Tom Corbett on Monday signed House Bill 1950, giving shale gas-rich counties in that state the ability to impose a 15-year impact fee on unconventional gas wells (see related story). West Virginia recently increased its permitting fee to $10,000 per well (see Shale Daily, Dec. 15, 2011).

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