The Pennsylvania House of Representatives, which last year approved a natural gas severance tax bill only to see it die in a subsequent lame duck session, will have another chance to implement the tax during its 2011 current session.
Rep. Greg Vitali (D-Delaware) has introduced a bill (HB 33) that includes a tax rate of 5% plus 4.6 cents/Mcf. The tax would generate an estimated $245 million in fiscal year 2011-12, growing to nearly $570 million by 2015, according to Vitali. Revenue from the severance tax would help fund environmental programs, assist local governments with costs related to the drilling industry and help bridge an estimate $4 billion shortfall in the state’s budget next year.
“Pennsylvania is the only major natural gas producing state in the nation that does not have a severance tax or fee in place. Out-of-state companies are profiting from the commonwealth’s resources, and the commonwealth should benefit too,” Vitali said.
Last year’s Democratic-controlled House overrode more moderate Republican proposals and passed a tax bill that included a 39 cents/Mcf tax rate (about 10%) with 60% of the revenue directed to environmental projects and municipal governments dealing with the impact of gas drilling, and 40% going into general revenue (see Shale Daily, Oct. 5, 2010). Despite commitments during last year’s budget negotiations to pass a severance tax on gas drillers, Pennsylvania Senate lawmakers balked on the issue during a lame duck session (see Shale Daily, Nov. 18, 2010).
Republicans hold majorities in both the Pennsylvania House and Senate this year and the state’s new governor, Tom Corbett, is also a Republican. During his campaign last year, Corbett vowed “no new taxes” and said he opposed a severance tax on natural gas (see Shale Daily, Oct. 28, 2010). But while a natural gas tax isn’t likely, Corbett has said he will “look at what the legislature proposes” (see Shale Daily, Jan. 5).
Vitali and the 57 co-sponsors of HB 33 say Pennsylvania has lost nearly $130 million by not enacting a severance tax since one was first introduced in October 2009.
“It’s important to emphasize that the goal is not to tax simply to punish an industry,” said Rep. Michael Gerber (D-Montgomery). “Many of us welcome the economic opportunity the industry presents, but we need revenue to protect the environment now and for years to come, to train Pennsylvanians for industry jobs and to support the local taxpayers who will bear the costs of an invasive industry.”
The bill has been referred to the House Finance Committee.
Recent surveys have found public support for a tax on natural gas drilling in the state to help close the revenue shortfall (see Shale Daily, Jan. 18; Dec. 28, 2010), and both former Gov. Ed Rendell and former Department of Environmental Protection Secretary John Hanger have said they think the new administration will pass a tax on drilling (see Shale Daily, Jan. 14).
Other Marcellus Shale states are considering increasing their severance tax rates. A bill introduced in West Virginia Jan. 31 would increase the severance tax on Marcellus gas “sold or transported out of the state” to 10% from the current 5% (see Shale Daily, Feb. 11a). A second bill would increase West Virginia’s horizontal drilling permit fees to $10,000 from the current $650.
In Arkansas, former natural gas industry executive Sheffield Nelson has filed a ballot initiative to raise the state’s severance tax on natural gas production to 7% from the current 5% of market value (see Shale Daily, Feb. 11b). Under Nelson’s plan, all of the proceeds would go to fund roads.
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