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Pennsylvania Governor’s NatGas Severance Tax Bills Introduced with Near Majority Support
A wide-ranging proposal pitched by Pennsylvania Gov. Tom Wolf earlier this year to implement a severance tax that would fund a $4.5 billion infrastructure revitalization program across the state has been introduced in the state legislature with near majority support in both chambers.
Wolf, a Democrat, has proposed a severance tax on unconventional natural gas production each year since taking office in 2015. But his efforts have fallen short in the face of strong resistance from the industry and a recalcitrant Republican-controlled legislature. He raised the stakes in January, coming off a blowout victory for a second term, when he announced “Restore Pennsylvania.” The program would utilize funds from a severance tax to improve high-speed internet, storm preparedness infrastructure, downstream manufacturing opportunities, blighted communities and transportation projects.
Introduced late Wednesday by a bipartisan group of lawmakers, House Bill 1585 has 98 co-sponsors, while Senate Bill 725 has 25 co-sponsors, the Wolf administration said. Bills need 102 votes to pass the state House and 26 to pass the state Senate. Republicans in both chambers are among the cosponsors, and more than 60 stakeholders and municipal leaders across the state have officially endorsed the legislation, the administration said. The backing comes after Wolf took his proposal on a roadshow of sorts shortly after proposing the plan, making more than 75 stops in communities across the state.
Pennsylvania is the nation’s second largest gas-producing state, churning out more than 6 Tcf last year. The governor said the state has “a real opportunity to make impactful infrastructure investments,” and he urged lawmakers to seize it. Wolf’s administration also kept up the pressure on Thursday, when it released seven white papers to accompany the legislation detailing the investments Restore Pennsylvania would help to fund.
The industry was quick to push back after the legislation was introduced. Marcellus Shale Coalition President David Spigelmyer called the plan a “tax, spend and borrow approach” that has “failed Pennsylvanians for far too long.” He said if passed, the bills would “be a gut punch to hardworking families and small businesses” across the state.
Wolf wants the state legislature to pass a volumetric tax that would rise and fall with gas prices. Producers would pay anywhere from $0.091-0.157/Mcf depending on the price of gas. The plan would keep the state’s impact fee, which is levied on all unconventional wells during their first 15 years of operation. The impact fee also has generated more than $1.4 billion for communities and state agencies since it was implemented in 2012.
Spigelmyer noted that communities are set to receive their share of impact fees this month, which are dedicated to strengthening infrastructure and other public services in areas where unconventional development occurs.
“Keeping the impact fee in place, Restore Pennsylvania will provide resources to communities that disproportionately receive impact fee funding, allowing all municipalities to complete much needed infrastructure projects and improving the quality of life for Pennsylvanians in every corner of the commonwealth,” the administration said of its plans to expand funding for other parts of the state.
API-PA Executive Director Stephanie Catarino Wissmann again warned that imposing a severance tax would discourage industry investments in the state, calling the legislation “counterproductive, punitive and anti-consumer policy.”
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