Wolf says Pennsylvania severance tax ‘not a partisan idea’

Matt Rourke/Associated Press

Matt Rourke/Associated Press

Power Source

By Laura Legere

Gov. Tom Wolf proposed a tax on natural gas production in his budget Tuesday that would raise money for education and environmental protection programs, while maintaining funding for communities at roughly the same level they are expected to receive this year from the current Marcellus Shale impact fee.

Mr. Wolf’s budget projects that a new tax on the volume and value of gas flowing from Pennsylvania wells will take effect on Jan. 1, 2016, and will raise $165.7 million in its first half-year, with $10 million transferred to the Department of Environmental Protection to enhance oversight of the gas industry and plug abandoned wells.

The tax proposal would raise an estimated $765.3 million for the state’s general fund in its first full fiscal year, and transfer $225 million to a separate fund to replace the impact fees that companies currently pay to state and local governments based on the number of wells they drill.

The bulk of the tax revenue will be invested in public education, the Democratic governor said in his budget address to the General Assembly.

“This is not a partisan idea,” Mr. Wolf said. “It’s a recognition that Pennsylvanians are right now getting a bad deal. We deserve to be fairly compensated for the use of our resources.”

Mr. Wolf said Pennsylvania is the only major gas-producing state without a severance tax. He is calling for a 5 percent tax on the value of gas at the wellhead, plus 4.7 cents per thousand cubic feet of gas extracted. The plan is based on a model used in West Virginia to hedge against fluctuations in the price and volume of gas.

The tax would replace the existing impact fee, which has raised more than $200 million a year since being enacted in 2012. The state Independent Fiscal Office estimates that 2014 impact fees, due in April, will total $220.4 million — equal to a 2.1 percent annual effective tax rate.

Natural gas industry groups predicted Mr. Wolf’s tax proposal will drive investment out of the state.

“The governor’s proposed tax hike could threaten the future of our state’s best job creators,” said Stephanie Catarino Wissman, executive director of the Associated Petroleum Industries of Pennsylvania.

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