Governor Tom Wolf of Pennsylvania proposed a severance tax on natural gas resources during remarks on his 2018 budget. This is the fourth time this tax has been proposed under Governor Wolf since taking office in 2015.
They say the third time’s the charm, so if you’re trying for the fourth time you just can’t take the hint: this is an unnecessary and costly policy that won’t work for Pennsylvania.
Both a Senate and House version of the severance tax bill have been introduced in the legislature this session.
Co-sponsoring the bill are state senators Tom Killion, R-Delaware County, and John Yudichak, D-Luzerne County, as well as state representatives Bernie O’Neill, R-Bucks County, and Jake Wheatley, D-Allegheny County. Both Republicans who have co-sponsored the bill do not represent an area located within the Marcellus Shale – which has seen much of the natural gas boom. Both Rep. Wheatley and Sen. Killion represent districts home to Marcellus Shale.
A severance tax would kill jobs and drive up consumer gas prices in Pennsylvania, and beyond.
President of Marcellus Shale Coalition, David Spigelmyer, spoke out against Governor Wolf’s severance tax saying it would, “…cost Pennsylvanians jobs, raise home energy costs for consumers, all while not helping a single student or school.”
Governor Wolf’s severance tax would be based on price and volume of natural gas at a rate of 4 percent, and grab $250 million in revenue starting in the 2019 fiscal year.
This $250 million tax is not only expensive, it is redundant.
Pennsylvania does not have an explicit severance tax, but instead the state already has a natural gas impact fee.
This fee, passed in 2012 by Republican Governor Tom Corbett, is paid each time a company drills a well for fracking. The company has to pay a fee, which acts like a tax, every year for 15 years. The first year, the tax ranges from $40,000-$60,000 each well, then descending the following years.
This impact fee has generated $1.5 billion in state revenue since 2012. In other words, state government is already cashing in on Pennsylvania’s status as the leading producer of natural gas for the northeast. Now the Governor is considering going even further, and killing the goose that laid the golden egg.
So if the Pennsylvania General Assembly passes a severance tax, Pennsylvanian companies would have to pay natural gas impact fee, and the severance tax, not to mention all the other taxes a business must cover. A severance tax is just plain greedy, and ultimately Pennsylvanians will pay with higher energy costs and fewer jobs.
In 2016, natural gas drilling was reported to employ 52,531 people, according to a Pa. Department of Labor statistic. A study conducted by the University of Pennsylvania showed consumers of natural gas saved $7.1 billion on their energy bills due to local supply and abundance of natural gas.
Instead of attacking an industry that has been an unbelievable success for Pennsylvanians, legislators should fight back against Governor Wolf’s proposed severance tax. It was a bad idea the first three times, it’s even worse the fourth time around.