With the short time remaining on the legislative calendar before the November elections, even Pennsylvania Gov. Ed Rendell appears to have lost confidence that a deal will emerge in the state legislature to enact a severance tax on the state’s oil and gas production.
When asked recently by The Philadelphia Inquirer newspaper if he was confident that he and legislative leaders would agree on a tax that would cash in on the state’s wildly expanding Marcellus natural gas production, “the governor shook his head, smiled, and said, ‘No.'”
The governor has been insistent on the plan he first proposed in 2009, which calls for a 5% tax on sales, plus 4.7 cents/Mcf of gas extracted. If a plan doesn’t come “awfully close” to that, Rendell has said he would veto it. And he has ruled out a deal with the industry and others to include provisions on forced pooling, well spacing and municipal zoning in exchange for support of the tax (see NGI, Sept. 6).
Rendell, who winds up his second term this year, has claimed that 70-80% of Pennsylvanians support the tax. But that’s a long way from saying the state’s fractious legislators can come together on a bill, state capital observers say. “They couldn’t even agree on a budget this year,” one commented. “And they couldn’t pass a tax in June, so just before the November elections, in the 10-12 days of legislative sessions remaining, it’s not likely they’ll get together on a tax.”
The Pennsylvania Senate has scheduled only 10 days in session prior to the election, while the House plans on 12 days.
The Republican-controlled Senate, led by Senate President Pro Tem Joe Scarnati, is expected to unveil a tax plan in the coming days, but GOP members generally have rejected Rendell’s proposal, and there doesn’t appear to be any room for negotiations.
Even the old line Pennsylvania producers can’t agree with the large Texas-based independents now crowding into the Marcellus fairway. “These guys come in here ready to make a deal with the politicians,” said one long-time shallow well producer. “You don’t make a deal with them. If you agree to a 5% tax, they’ll make it 25%.”
As for next year, Rendell is term-limited and will not be returning. According to polls in the state, the Republican candidate, Tom Corbett, appears to be leading. Pennsylvania has an unbroken record going back more than 60 years of alternating Democratic and Republican governors every eight years. Going by that record the Democrats’ time is up. And, despite the fact that the state faces budget deficits, Corbett has made and often repeated a “read my lips” pledge of “no new taxes.”
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