HARRISBURG – Saying the gas industry is distorting information about its economic health, a top aide to Gov. Tom Wolf said Monday it is time for lawmakers to pass a state severance tax on Marcellus Shale production.
Chief of Staff Katie McGinty said lawmakers need to work in a bipartisan fashion on severance tax legislation in the same way the House did last week to pass a major school property tax shift bill.
“We need to keep moving on this key part of a responsible budget,” she told the Pennsylvania Press Club.
Having Pennsylvania remain the only major energy-producing state without a severance tax is not fair or sustainable, said Ms. McGinty.
“The impact fee (on drillers) is a paltry substitute for a severance tax,” she said.
Mr. Wolf has proposed a severance tax of 5 percent on the value of gas at the wellhead that puts 4.7 cents per thousand cubic feet of volume to generate revenue to help restore earlier cuts to public education. He also would use severance tax revenue to maintain a local impact fee to local governments in the drilling region that was enacted in 2012.
The Marcellus Shale Coalition and gas industry supporters have criticized the severance tax proposal, saying it comes at a time when producers struggle with low prices, demand that has not kept pace with supply and an inadequate network of pipelines to ship gas to market.
The soft prices for gas on the market do not tell the full story, said Ms. McGinty. Financial reports posted by such firms as Range Resources Corp. and Cabot Oil & Gas Corp. show that 2014 was a banner year for the industry, she said.
Yet, Ms. McGinty agreed that Pennsylvania has inadequate pipelines and said the governor supports responsible development of the gas resource.
Later, Mr. Wolf sent a letter to the Pennsylvania Chamber of Business and Industry and other business groups saying he’s disappointed by their opposition to a severance tax.
“You know that the severance tax I proposed is critical to getting Pennsylvania back on track, and it will do so at minimal costs to Pennsylvania citizens,” he wrote. “You know that since Pennsylvania exports a significant amount of the natural gas it produces, an estimated 80 percent of the tax will be paid by non-Pennsylvanians.”
Pennsylvania’s gas industry needs first to develop markets and the infrastructure to support shipment before a severance tax could be considered, said Chamber President Gene Barr, who attended the press club event.
“The legislators viewed it (severance tax) differently a few years ago when prices were high,” he said.
Mr. Barr said the impact fee really functions like a severance tax at a rate of 3 percent to 4 percent.
This article was written by Robert Swift, from The Times-Tribune, Scranton, Pa. and was legally licensed through the NewsCred publisher network.