Wolf’s budget relies on natural gas to fund new energy projects

Power Source

By Laura Legere

Gov. Tom Wolf’s proposed budget includes new funding for an array of energy projects fueled by both traditional and renewable resources, and it relies heavily on one energy source — natural gas — to pay for it.

The Democratic governor is proposing to issue a $675 million bond to pay for economic development initiatives, with $225 million of it slated for a package of alternative energy, natural gas and energy efficiency projects.

The estimated $55 million annual debt service for the bond would be paid from a severance tax that Mr. Wolf wants to put on the volume and value of gas extracted from the Marcellus and Utica shales.

The energy investment package proposed in Mr. Wolf’s first budget “helps all of our energy sources succeed,” said John Quigley, acting secretary of the Department Environmental Protection at a budget briefing last week.

It also ties the fate of various alternative energy programs to the successful development of the state’s shale gas.

The budget “shows a symbiosis of the gas industry,” said Christina Simeone, deputy director of the University of Pennsylvania’s Kleinman Center for Energy Policy. “It’s basically utilizing the gas boom to power this diversified strategy of economic development that the governor has seen as a priority.”

“Implicit in all of this,” she added, “is that the industry has to be an economically viable success.”

Mr. Wolf has proposed a 5 percent tax on the value of gas at the wellhead, plus 4.7 cents per thousand cubic feet of volume, with the funds directed to education, environmental protection and communities that host natural gas wells, as well as the debt service payment on the bond.

Oil and gas industry groups and Republican leaders in the General Assembly have said companies will cut their investment in the Commonwealth if they are faced with a severance tax. They also have raised doubts — based on the low prices of gas
— that the tax could bring in anywhere near the $1 billion the administration projects it will raise in its first full year.

The Pennsylvania Chamber of Business and Industry, which opposes the severance tax, questioned the fairness of using revenue from a tax on gas production to support wind, solar and other renewable energy projects.

“There’s concern about why one industry would be expected to subsidize its competitors,” the chamber’s government affairs manager Kevin Sunday said.

“We certainly believe renewables have a place in the power generation portfolio,” he said, “but only to the extent that they can compete on price like everybody else.”

Read more

Comments are closed.