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Study says extraction tax isn’t enough

Pennsylvania Business Daily reports that according to the Allegheny Institute of Public Policy, natural gas production rates would need to double in order to compensate for lost revenue if Gov.-elect Tom Wolf’s proposed five percent severance tax replaces the current impact fee.

Since the impact fee was established by Act 13 in 2011, $632.4 million in revenue has been generated. Based on gas production levels in that same time frame, the institute reports that a five percent severance tax on the market value of gas would have little change on the revenue created in the first two years. In 2013, the revenue would have doubled.

That revenue alone, however, would not cover what the current impact fee pays for. Under the new proposal, revenue generated from the tax would mostly go to education funding. Right now eight state agencies receive shares of the impact fee. The remaining 60 percent of the money is allotted to local municipalities most impacted by energy development. Generally, these local agencies use the funds received from the impact fee to bolster their budgets. The remaining 40 percent is added to the Marcellus Shale Legacy Fund and is used for various environmental projects.

The Institute’s report states that the revenue created by the proposed severance tax would need to equal $1.2 billion before expenses currently covered by the impact fee are funded.  Additional revenue would also be needed to cover educational funding. In order to reach this amount of revenue, according to the report, natural gas production would have to double and prices would need to be similar to the average prices from the past three years.

To read the original report from the Pennsylvania Business Daily, click here.

In related news, Drilling tax could cripple state economy, gas industry warns.

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