Deal seen near on Penna. budget

Posted: June 30, 2014

HARRISBURG - For years, the GOP-led legislature has resisted imposing a tax on the extraction of natural gas from the Marcellus Shale, arguing it would create a burden on a fledgling industry.

But with gas production booming, tax supporters have countered that Pennsylvania should capitalize on hundreds of millions in potential revenue - money that could have helped fuel the state's economic recovery.

After weeks of rumblings that a natural gas tax might be needed to close the state's nearly $1.5 billion budget shortfall, legislators left Friday confident that next year's spending plan won't rely on new taxes. They didn't say how they would balance the budget, but they return to session Sunday evening, with an eye toward reaching a deal by Monday night.

Nevertheless, the mere threat of a tax sent the gas industry on budget-season defensive. After successfully fending off attempts for the last five years to enact a severance tax, the gas industry scrambled to rally opposition.

'Misguided'

Representatives from three industry groups last week said such a tax would increase the cost of drilling, reducing profits and driving drill rigs to other states.

"A misguided severance tax could strangle production, undermine Pennsylvania's competitive position, and threaten our bright economic future," said Stephanie Catarino Wissman, executive director of the Associated Petroleum Industries of Pennsylvania.

She questioned whether a severance tax would generate the kind of revenue that its supporters claim. "The tax is not the panacea that many think it would be," she said.

More than 30 states

Pennsylvania remains the largest natural-gas-producing state without a severance tax, and polls overwhelmingly show voters support the tax. More than 30 states levy taxes on the extraction of oil and gas that in 2010 generated more than $11 billion.

A 5 percent tax, which is about average compared with other gas states' rates, would generate $700 million.

In 2012, Gov. Corbett signed a shale gas impact-fee bill that has since generated $600 million in revenue from drillers. Most of the fees, paid per well, are directed to southwestern counties and northern counties where drilling occurs, to repair roads and bridges and other infrastructure affected by industry activity.


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