Wolf’s budget plan calls for new tax on natural gas industry

gov-tom-wolf-pa-us-flag_1024x768State Impact

By Marie Cusick

Following through on his campaign pledge, Governor Wolf made taxing the natural gas industry a central part of his budget proposal Tuesday.

Wolf wants to model it on West Virginia, with a tax on both volume and sales. Drillers would pay a five percent tax on the value of the gas, plus 4.7 cents per thousand cubic feet. The governor called it a common-sense approach. He projects it will bring in over $1 billion per year, which he wants to use to boost funding to public education.

“Natural gas production is growing faster in Pennsylvania than anywhere else in the country,” 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.”

His proposal assumes gas production and prices will consistently increase in the future.

But not everyone agrees that will happen.

Earlier Tuesday morning, the state Senate held a joint committee meeting to hear from local officials who argued it would be better to keep the current impact fee. Right now gas companies pay a flat fee every time they drill a well. So far, it’s brought in an average of $210 million per year, with most of the money going back to communities hosting drillers.

Wolf says local governments can keep that money. He’s proposing to set aside $225 million per year from the gas severance tax. It would be divided up the same way it is now– with the most money going back to regions with the most wells.

But some county officials, like commissioner Alan Hall of (R- Susquehanna County), worry a new tax will drive away business.

“If you put the severance tax in and it works, then you’re all heroes,” he told legislators.  ”If you put the severance tax in and the industry walks away because it can’t maintain a profit, not only do you lose the impact fee, you lose the severance tax you wanted.”

Republican legislative leaders sharply criticized Wolf’s proposal as a massive tax and spending plan.

“Governor Wolf’s proposals were disappointing,” said House Speaker Mike Turzai (R-Allegheny). “It was disrespectful of hard-working people. He wants to take so much out of their pockets.”

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