Pennsylvania Gov. Ed Rendell said his decision to push for a tax on natural gas extraction in the Marcellus Shale followed the results of the state’s recent public lands lease sale, which brought in twice the revenue that state officials had expected.

After initially asking the General Assembly last year to enact a severance tax on gas extraction, Rendell dropped the proposed 5% tax plan until producers were “up and running” in the Marcellus Shale play (see Daily GPI, Sept. 2, 2009; Feb. 9, 2009). Rendell said then he planned to “revisit” the tax issue this year.

Following the lease sale (see Daily GPI, Jan. 15), Rendell said he would unveil the tax plan during the annual state budget address on Feb. 9.

“This is an enterprise in which the private sector will be profitable,” Rendell said, referring to Marcellus Shale exploration. “The people of Pennsylvania should profit from this.”

Rendell plans to meet with energy industry representatives in the next few days to discuss several issues related to the Marcellus Shale, which include not only the tax proposal but also water quality issues related to gas extraction.

Asked if the industry meetings could again cause a change of heart on the tax push, a Rendell spokesman told NGI that the governor referred to ExxonMobil Corp.’s recent decision to pay $41 billion to buy XTO Energy Inc., which is exploring for gas in the Marcellus Shale (see Daily GPI, Dec. 15, 2009).

“It’s hard for the industry to cry poor mouth,” Rendell told reporters Thursday. “Exxon…is the most successful company in the history of the world…and it just paid a high price to buy a gas company.”

Rendell noted that his approach to developing Pennsylvania’s gas supplies has always been to balance the economic opportunities against the state’s environmental responsibilities.

“I believe that we must view natural gas exploration as a unique economic opportunity and as a critical part of America’s strategy to decrease our dependence on foreign oil and cut down our carbon emissions,” said Rendell.

“Ensuring that more natural gas is supplied by Pennsylvania will create jobs here and orders for Pennsylvania companies, but that cannot happen at the expense of our environment. We have beefed up our permitting requirements and pace of inspections, and I continue to believe that we need a severance tax — just as they are doing in many other states. I will propose that this tax be effective by July, and I hope the General Assembly will embrace this proposal.”

A spokesman for Pennsylvania House Republican Steve Miskin told NGI that the tax plan once again would meet resistance in the General Assembly.

“A tax is a tax,” said a Miskin spokesman. The state, he said, should look for other ways to lower its budget before it enacts a tax.

On Thursday Rendell said he also will push for the General Assembly to update Pennsylvania’s alternative energy portfolio standards.

“Our standards were passed in 2004 and they have made a huge difference, but have since been surpassed by the aggressive plans of other states,” said Rendell. “That has put us at a competitive disadvantage when it comes to attracting clean energy projects to Pennsylvania, which means fewer new jobs here.”

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