Victory for Republican candidate Tom Corbett in the race for governor of Pennsylvania and the replacement of split leadership in the legislature with the GOP takeover of both houses may be the death knell for a natural gas severance tax in the state — or not.
Pennsylvania election results “were a good thing” for natural gas companies operating in the state, Atlas Resources President Richard Weber told a Marcellus Shale conference in Pittsburgh Wednesday.
“We really look forward to working with this administration and with this new legislature to modernize the legislative and regulatory environment here in Pennsylvania…I know with [Corbett] as governor, we’re going to get it right.”
Skeptics point out that political candidates don’t necessarily hold to the same views once they become elected officials. In that case, Corbett’s “no severance tax” campaign pledge may not actually mean there won’t be any levies on the oil and gas industry. They just might not be called a “severance tax.” The state faces a huge and growing deficit in the coming years, which one way or another will have to be overcome.
Many Republicans and industry execs say they’re not opposed to a “reasonable” severance tax, such as the one backed by Republican legislators this year.
“Corbett’s election is likely to slow down a severance tax as opposed to speed it up,” said National Fuel Gas CEO David F. Smith, whose company is active in Pennsylvania’s Marcellus shale. “And also, both the Senate and House now are in Republican hands in Pennsylvania, which is also likely to slow it down.
“That’s not to suggest there won’t be one. That’s not even to suggest that we’re fighting one. A reasonable severance tax that deals with the environment and goes back to the communities is not a terrible thing. It’s just a question of [getting] a reasonable severance tax.”
Rep. Sam Smith (R-Jefferson), the presumptive Speaker of the Pennsylvania House, mentioned the possibility of a “fee” during a press conference in Harrisburg Wednesday. “While some of our members certainly support just a straight up tax on the industry, our caucus certainly respects that the industry does have an impact on local communities and somehow they need to contribute to that, whether its through the way the roads are bonded or some other impact fee of a sort,”
“But really what we believe is that we need to work with that industry…we’re committed to holding the industry environmentally responsible, we’re committed to them being responsible for some of the impacts they have at the local level, and we are mostly committed to making sure that the second- and third-tier economic development opportunities — those job opportunities — come out of this industry.”
A bill passed by the then Democratic-controlled House that would have imposed a 39 cents/Mcf severance tax on natural gas drilling in the state (see NGI, Oct. 4) “wasn’t a pro-industry bill, it wasn’t a pro-environment bill — it was a pro-government bill,” Smith said. “It was about spending money. It wasn’t about anything but spending more money. For the people that really want to spend more money, the way you do it is create more jobs in Pennsylvania, allow the industry to create more jobs, more revenue will come in, then you’ll have money for whatever it is — schools, fire, police, whatever — that’s where the money is, not taxing the industry straight up.”
One thing the industry can pretty much count on are some revisions in operations of the Department of Environmental Protection, including the replacement of Gov. Ed Rendell’s appointee, Secretary John Hanger, who has been generally and specifically critical of the industry.
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