From The Times
Pennsylvania Gov. Tom Wolf has again asked the state Legislature to enact a severance tax on natural gas production, and, predictably, the industry is already fighting back against it.
Wolf has proposed a different severance tax in each of his three years as governor, proposals that have largely fallen on unenthusiastic ears in the Republican-controlled Legislature.
This year, Wolf called for a 6.5 percent tax on natural gas production, a tax that would replace the current system of impact fees. Instead of being a flat tax, impact fees are imposed on each gas well drilled in Pennsylvania, while each well must pay a varying amount according to its age.
The impact fees, which are distributed to counties and municipalities across the state, brought in $187 million last year, while preliminary projections are estimating $174 million for this year.
According to Wolf, his severance tax would bring in an estimated $293 million in its first year, a number that could increase to nearly $500 million by 2020.
Despite that, the natural gas industry fought back in a big way Tuesday after Wolf’s announcement.
Stephanie Catarino Wissman, executive director of the American Petroleum Institute’s Pennsylvania division, was blunt in her criticism of Wolf’s third attempt at enacting a severance tax.
“Here we go again,” she said. “Gov. Wolf should look at ways to assist projects that expand Pennsylvania energy leadership rather than place a punitive tax on the industry that would harm consumers and tens of thousands of jobs in Pennsylvania.”
Wissman touted the benefits of the impact fee system as one reason why Pennsylvania doesn’t need a severance tax. The impact “tax,” as she called it, has distributed more than $1 billion since its inception in 2012, “the bulk of which goes directly to local communities.”
She added that, even in a downturn in the industry, Pennsylvania still saw $187 million in impact fees last year.
The response wasn’t much different from the Marcellus Shale Coalition which, in year’s past, has heavily opposed any kind of severance tax.
“We’re disappointed that Gov. Wolf continues to focus on additional energy taxes, which will further harm the commonwealth’s economic competitiveness and cost good-paying, Pennsylvania jobs,” coalition President David Spigelmyer said.
In a prepared statement, Spigelmyer said he understands the “tough budget challenges ahead,” but a severance tax would “stunt our industry’s ability to reinvest in Pennsylvania.”
A severance tax would just be the latest in a “wave of job-crushing regulations” imposed by Wolf, he said.
Finally, the Pennsylvania Independent Oil and Gas Association weighed in on the topic. Dan Weaver, the president of the group, said Wolf is “ignoring a fundamental market reality with this ill-advised proposal.”
That market reality is that the industry is still in the midst of a large slump, and, according to Weaver, enacting a new tax would be akin to kicking the industry while it’s down.
“This is the same market reality that existed during the last discussion about imposing an additional tax on natural gas production, and that will exist for the near future,” Weaver said. “This market reality means that a 6.5 percent severance tax rate would have a huge detrimental impact on natural gas development and jobs while raising very little revenue to make even the slightest dent in Pennsylvania’s current and projected budget deficits.”
As in the past, the severance tax proposal is expected to be met with considerable resistance from Republicans in the Legislature.
