Rendell says agreement unlikely on Marcellus Shale tax

Gov. Rendell discussed his proposal to tax gas from the Marcellus Shale formation during an appearance at Coventry Woods Preserve in North Coventry, Chester County. He said he would veto any plan that didn't come "awfully close" to his.
Gov. Rendell discussed his proposal to tax gas from the Marcellus Shale formation during an appearance at Coventry Woods Preserve in North Coventry, Chester County. He said he would veto any plan that didn't come "awfully close" to his.
Posted: September 09, 2010

Gov. Rendell said Wednesday that he doubted he and state lawmakers would meet their Oct. 1 deadline to pass a tax on natural-gas drillers - which could pour hundreds of millions of dollars into state and local governments' recession-ravaged coffers.

Speaking to reporters after a gathering with local officials and environmentalists in Chester County, Rendell said he would veto any proposal that didn't come "awfully close" to his plan for a 5 percent tax on sales of the extracted gas, plus an additional 4.7 cents for every 1,000 cubic feet of gas produced.

Asked if he was confident that he and legislative leaders would get a gas tax enacted by their self-imposed deadline, the governor shook his head, smiled, and said, "No."

Leaders in the Republican-controlled Senate are expected to offer details of their own plan next week. They generally have rejected Rendell's as untenable.

"We're not confident that the House Democratic caucus and the governor can be reasonable on the tax rate," Andrew Crompton, chief of staff to Senate President Pro Tem Joe Scarnati (R., Jefferson), said Wednesday.

The comment signaled new trouble for the so-called gas severance tax, a plan that collapsed about the same time last year. The governor revived the idea this year, and, as part of budget negotiations, he and lawmakers agreed to reach a deal by Oct. 1. Rendell spokesman Gary Tuma said Wednesday night that "no legal or practical reason" prevented all sides from working toward a tax until the legislative session ends in mid-October.

Dozens of bills are floating around Harrisburg, and the next few weeks are expected to bring with them a frantic dose of lobbying and deal-making over the fate of the proposed tax.

In the balance could be one of the biggest single sources of state funding to emerge in decades - potentially hundreds of millions of dollars flowing from wells in the gas-rich Marcellus Shale formation beneath the state - and tens of thousands of jobs.

The Pennsylvania deposit underlies most of the state except for its southeastern corner. Thousands of drill permits have been issued in the affected counties in the last two years, and more are expected.

The surge has sparked water-pollution and safety concerns from environmentalists, along with worries from municipalities that fear being overburdened.

To get the gas, drillers shoot a mix of water and chemicals deep into the ground to break up the shale and release the gas trapped within it, pump the gas through wells, and then haul it away by truck.

Pennsylvania remains the largest gas-producing state not to collect any tax on those natural resources.

Industry officials have pressed for a 1.5 percent tax rate during the first five years of any such tax, arguing that they need the time to recoup startup costs.

"In order to ensure that the potentials of the Marcellus are fully realized, we remain focused on not only modernizing Pennsylvania's legislative and regulatory framework, but making certain that a severance tax does not discourage critical capital investments from flowing into the commonwealth," Kathryn Klaber, president of the Marcellus Shale Coalition, which represents many gas and energy companies, said in a statement.

Rendell's visit to Coventry Woods, a park in North Coventry Township, marked his third public appearance in a week to push for the tax.

The event was sponsored by environmentalists, who want some of the tax revenue earmarked for the state's Growing Greener initiative, which has seen its annual funding plummet to $15 million from $200 million in two years.

"We don't think that it's far-fetched that we could get half of that [$200 million] from a severance tax," said Andrew Heath, executive director of a group called Renew Growing Greener.

Heath said he and other environmentalists met weekly with several GOP legislators and industry executives this summer to discuss the issue. He said that the talks were cordial but that lawmakers "are not really showing their cards yet."

Rendell stopped short of saying exactly where the tax proceeds might go. He said it would be foolish for the state to discourage drilling, not only for the financial benefits but also because it would help ease national dependence on foreign fuel sources.

But he also said the plan must include safeguards for the environment and the communities where the extraction occurs. Drilling and transporting the gas has stressed hundreds of miles of local roads and scores of bridges, he noted.

Rendell held up a news article about a well fire in Hopewell Township, and cited the June explosion at a well in Clearfield County that spewed gas and chemicals for 16 hours because local fire crews were unprepared to cap it.

"This is what we're faced with," he said.

His tax proposal mirrors one imposed on drillers by West Virginia, another Marcellus Shale state.

Crompton, the aide to Scarnati, said GOP lawmakers believe a more reasonable model is Arkansas' tax, which began at 1.5 percent and rose to 5 percent after three years.

Neither side has discussed a compromise.

"We haven't actively engaged the governor's office, nor have they actively engaged us," Crompton said. "Instead, he's out doing this tour across the commonwealth."

Even a veto is likely to be seen as an industry victory, and could catapult the issue squarely into the governor's race.

Tom Corbett, the Republican nominee, has opposed any new taxes, while his opponent, Democrat Dan Onorato, supports taxing the drillers.

Rendell urged the crowd at Coventry Woods to target their local lawmakers. He named a half-dozen Republicans from the Philadelphia suburbs who he said could turn the tide on the legislation.

"I don't really have any leverage left," he said, comparing himself to a football coach on the cusp of retirement. "I've been around for eight years, and all the players are sick and tired of listening to me."


Contact staff writer John P. Martin at 610-313-8120 or jmartin@phillynews.com.

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