For the last two years former Pennsylvania Gov. Ed Rendell worked tirelessly to impose a new tax on natural gas extraction in the Marcellus Shale. While Rendell left office empty-handed, lawmakers in Harrisburg are back with a new proposal to tax one of the most promising sectors of the Keystone State economy. The game plan this year: just don’t call it a tax.
SB 1100, introduced last week by Sen. Joe Scarnati – who was the Senate field marshal for Rendell’s push for a severance tax last year, would impose $10,000 per wellhead “impact fee” on drilling operations in the Marcellus Shale.
Call it what you like, SB 1100 is a tax by any objective assessment. A large portion of the money derived from this new levy would go to localities where no drilling is occurring. This legislation also creates a slush fund for pet projects that have nothing to do with the impact of drilling in the Marcellus Shale.
The fact is that the natural gas industry is already required by law to compensate for the impact of their operations in Pennsylvania and no proof has been presented that industry is not in compliance with that requirement.
The reality is that the impact of drilling in the Marcellus Shale has been a net positive for the commonwealth. Rep. Rick Saccone detailed on the Commonwealth Foundation’s website the boon that the industry has been to Pennsylvania:
“The facts are that in Pennsylvania, Marcellus drillers contributed more than $15 billion in capital investment and have paid in excess of $5 billion in royalties to landowners not including more than $1 billion in state and local revenues. Think of every well as a nearly $5 million construction project boosting a local economy while adding revenue to neighboring municipal coffers and businesses in various ways. “
In an attempt to avert attention from the state’s overspending problem, government employee union lobbyists and other Harrisburg spending interests like to demonize energy companies and their executives; but as I noted in Politico last year, it exposes their ignorance as to who owns energy companies:
“Fewer than 2 percent of oil and natural gas industry shares are owned by corporate management. The remainder are owned by tens of millions of middle-class Americans through their retirement investments in 401(k)’s, IRAs, pensions and other vehicles….Speaking of pensions, 27 percent of oil and natural gas industry stocks are owned by pension funds.”
Lawmakers have a lot of work to do to rectify the state’s overspending problem, projected at $5 billion through the next fiscal year, and efforts to tack a new tax on one of most promising sources of job creation in the state only serve as an unnecessary and ill-advised distraction.
SB 1100 is currently sitting in the Senate Environmental Resources and Energy Committee. To read the letter of opposition that ATR sent to committee members last week, click here.
To cut through the rhetoric and misinformation about natural gas taxes in Pennsylvania, check out this great primer from the Commonwealth Foundation.