Pa. Governor Makes Shale Tax a Priority

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Pennsylvania is the second largest producer of natural gas — just behind Texas — yet it remains the only state in the nation without any tax on resource extraction. Gov. Tom Wolf wants to change that.

He proposed in his 2015-16 budget that Pennsylvania enact a severance tax to bring Pennsylvania in line with every other major gas-producing state in the nation. It is modeled on the severance tax in effect in neighboring West Virginia. Drillers would pay 5 percent on the value of gas plus 4.7 cents per thousand cubic feet of gas drilled.

The governor estimates it will bring in $1 billion per year.

“Natural gas production is growing faster in Pennsylvania than anywhere else in the country,” Gov. Wolf said in his budget address. “Yet, we are the only major producer of natural gas that does not ask drillers to pay their fair share or provide a return on our resources.”

Pennsylvania does have a natural gas impact fee, but according to the Pennsylvania Independent Fiscal Office, the annual effective rate paid by Marcellus Shale drillers has steadily decreased over the past few years and remains lower than what drillers pay in other energy-rich states.

Polls show that there is public support among Pennsylvanians for an extraction tax, but an industry group is saying a new tax will drive down production. Shale Energy Insider reports:

[Marcellus Shale Coalition David] Spigelmyer forecasts that companies “may not stick around” if there are cheaper opportunities elsewhere; “ capital will flow like water from the state if we don’t get it correct,” he added.

A spokesman for the governor suggested that would not be the case as all other major producing states have some form of severance tax, they described Wolf’s proposals as a “very reasonable tax”.