While Drillers' Production Soars, Pennsylvania's Impact Fee Stumbles

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Drilling Rig
This post was originally published at the Third and State Blog

By Jan Jarrett
Pennsylvania Budget and Policy Center

The impact fee isn’t working for Pennsylvania, but it is for the gas drillers.

Last year, the drillers far exceeded their production record from the previous year by 30 percent. They produced 4 trillion cubic feet of natural gas. Yet their impact fee payments went down slightly, even as production soared.

That drop proves that the impact fee does not generate increasing revenues for Pennsylvania as the drilling industry’s production and profits climb. A severance tax on production, like the one proposed by Gov. Tom Wolf, would generate increasing revenue as production increases and gas prices rise.

Gov. Wolf has also proposed retaining the impact fee at its highest level, a deal which should now look better to the communities in the gas field that receive those payments.

The current impact fee is no substitute for a reasonable severance tax. Some of the money flowing from our gas field should go where the governor wants it to go – to restore education funding and extra-curricular program cuts, to rehire laid-off guidance counselors, librarians and nurses, and to expand early childhood education at our public schools.

Yet 10 years after the first gas driller bored into the Marcellus Shale formation, the commonwealth remains the only major gas-producing state without a severance tax.

Legislation to enact a severance tax has been introduced into the General Assembly every year since 2009. And every year, the General Assembly has failed to get a severance tax bill to the governor’s desk. The Republican budget for 2015-16 does not include a severance tax.

Polls over these years have shown that a severance tax enjoys broad, bipartisan support from voters. Bipartisan support also exists in the General Assembly, where both Republican and Democratic lawmakers have introduced versions of a severance tax.

So why hasn’t a severance tax passed? Well, there are a million reasons – no, wait, -- there are 55 million reasons why Pennsylvania continues to give the drillers a huge tax break. According to the latest Marcellus Money report, a project of Common Cause of Pennsylvania and the Conservation Voters of Pennsylvania, since 2007 gas drillers have spent $46.8 million lobbying Pennsylvania officials and $8.2 million in campaign contributions to candidates for office and PACs.

In failing to include a severance tax in their budget, the Republican leadership chose oil and gas industry lobbyists and PACs over the needs of our children and communities. This budget richly deserves the veto the governor is sure to deliver.