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New Penn State Study Shows Governor Rendell's Severance Tax to be an Economic Loser


Posted by Patrick Gleason on Wednesday, July 29th, 2009, 6:05 PM PERMALINK


While Pennsylvania lawmakers remain deadlocked in what has been the Keystone State's longest budget stalemate in nearly two decades, a new study on the Marcellus Shale Formation out of Penn State couldn't be more timely. Geosciences professor Terry Engelder's study helps explain why Gov. Ed Rendell's proposal to impose a severance tax on natural gas production would hurt the Pennsylvania economy, impede job creation, and actually have a negative effect on revenue.

Key findings from the study, outlined in the Pittsburgh Tribune-Review, are as follows:

"nearly 500 trillion cubic feet of natural gas could be produced from the entire formation, which is found in portions of five states, including most of Pennsylvania."

"Pennsylvania's Marcellus Shale natural gas formation alone could generate $13.5 billion in economic activity in the next 11 years."

Dr. Engelder's study concludes that plans by Rendell and legislative Democrats to impose a severance tax will yield a "30% drop in drilling activity and an estimated $880 million loss in taxes between now and 2020."

It is estimated that Marcellus Shale will create 98,000 gas industry jobs by next year. If one deduces that a 30% reduction in drilling activity will result in an equal reduction in jobs tied to drilling, Rendell's severance tax will result in upwards of 29,000 lost jobs.

This is in addition to the 24,000 jobs that the Beacon Hill Institute estimates would be lost due to Rendell's income tax hike alone.

Given the job destroying and economy depressing prowessness of Rendell's budget plan it's no wonder the Pennsylvania Governor's approval rating has sunk to record lows.

Lawmakers are set to take budget negotations to conference committee this week. Click here to view the July 14 letter that ATR sent to Pennsylvania lawmakers.

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