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Pennsylvania Governor Calls for Severance Tax Summit

With Pennsylvania's 2010 legislative session winding down, Gov. Ed Rendell on Friday asked leaders of the General Assembly to gather with him and energy industry leaders in Harrisburg Monday to work on a severance tax on gas produced from the state's portion of the prolific Marcellus Shale play.

"Since I signed the fiscal code, which contained the Oct. 1 promise, I, as well as you, made a commitment to the people of this commonwealth," Rendell wrote in a letter sent Friday to 10 state lawmakers including Senate President Pro Tem Joe Scarnati (R-Jefferson), Senate Minority Leader Robert Mellow (D-Lackawanna), House Speaker Keith McCall (D-Carbon) and House Minority Leader Samuel Smith (R-Jefferson). "It is my intention to see that that commitment is honored, even if it is a few days late.

"In order to achieve that goal, we must stop the carping and criticizing and reach an agreement on a bill that will allow us to continue to meet the environmental challenges that shale drilling creates, that will give us the resources to send to our county and local governments so that they can meet the economic burdens that drilling activity presents to them, and that allows the industry to continue to provide economic benefits to the commonwealth."

Rendell called on legislative leaders and industry representatives to meet with him at the Governor's Office at 1:30 p.m. Monday, when state offices are to be closed for the Columbus Day holiday.

In the closing days of budget negotiations earlier this year, House and Senate members agreed to enact a severance tax by Oct. 1 that would go into effect Jan. 1 (see Daily GPI, July 2). The House passed a version of the bill (SB 1155) prior to that deadline that included a 39 cents/Mcf tax rate (see Shale Daily, Oct. 5), but the Senate, which last met Sept. 29, has taken no action and is not due to reconvene until Tuesday. There are only three scheduled session days (Oct. 12-14) remaining before the Nov. 2 election and only one more (Nov. 17) before the end of the year.

Earlier in the week, Rendell urged Republican leaders in the state's Senate to at least come up with a counter offer to the natural gas severance tax bill passed by the Democratic House before the end of the 2010 legislative session.

Since the House passed SB 1155, "in spite of the expressed commitment made by you in the fiscal code, your comments, and those made by your staff, do not offer a shred of evidence that you have any intention of living up to this commitment you made to put the severance tax to a vote in the Senate before you adjourn the session," Rendell wrote to Scarnati and Senate Majority Leader Dominic Pileggi (R-Chester/Delaware).

"Although the House believes the bill that passed imposes a tax at a fair and reasonable rate, I recognize that you may want to make changes to their taxing approach. However, in the last seven days you have not made a counter offer to the House tax rate, tax approach or their defined uses of the new revenues. Your failure to make a counter offer seems to suggest that you are more interested in running out the clock than living up to your public commitment to impose a tax on this industry."

Leaders in the Republican-controlled Senate have questioned the constitutionality of SB 1155 and have said they cannot sign on to the 39 cents/Mcf tax rate approved by the House.

Scarnati and other Senate Republicans have said the House may have violated the state's constitution by adding the severance tax language to a county bonding bill. Even if they were to pass the bill, it could get overturned in court, they said. Scarnati has requested an official opinion from the state's Legislative Reference Bureau (LRB) "regarding the likely constitutionality" of SB 1155. Scarnati asked that the LRB opinion be completed by Monday (Oct. 11).

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